> Annual Report 2010
> Key figures of comdirect bank group 2010 2009 Change in % comdirect group as of 31.12. Customers number 2,296,075 2,150,563 6.8 Custody accounts number 1,482,023 1,419,037 4.4 Executed orders number 15,305,203 14,661,234 4.4 Total assets under custody in million 42,535 35,572 19.6 of which: portfolio volume in million 32,197 26,463 21.7 of which: deposit volume in million 10,338 9,110 13.5 comdirect business-to-customer (B2C)* business line as of 31.12. Customers number 1,559,021 1,450,720 7.5 Custody accounts number 748,151 719,194 4.0 Current accounts number 647,048 533,928 21.2 Tagesgeld PLUS ( call money plus ) accounts number 1,130,998 960,935 17.7 Executed orders number 7,824,053 7,319,045 6.9 Average order activity per custody account number 10.7 10.3 3.9 Order volume per executed order in 5,110 4,512 13.3 Total assets under custody in million 26,319 22,241 18.3 of which: portfolio volume in million 16,113 13,158 22.5 of which: deposit volume in million 10,207 9,083 12.4 Credit volume in million 198 176 12.4 comdirect business-to-business (B2B)* business line as of 31.12. Customers number 737,054 699,843 5.3 Executed orders number 7,481,150 7,342,189 1.9 Total assets under custody in million 16,216 13,331 21.6 Earnings ratios Net commission income in thousand 172,772 148,757 16.1 Net interest income before provisions in thousand 102,074 108,693 6.1 Administrative expenses in thousand 210,028 198,918 5.6 Pre-tax profit in thousand 80,874 75,993 6.4 Net profit in thousand 59,634 56,624 5.3 Earnings per share in 0.42 0.40 5.3 Balance sheet key figures as of 31.12. Balance sheet total in million 11,040 9,785 12.8 Equity in million 514 533 3.6 Equity ratio 1) in % 4.4 4.9 Regulatory indicators under Basel II 2) as of 31.12. Risk weighted assets 3) in million 546 500 9.2 Eligible amount for operational risks in million 22 23 4.2 Core capital in million 356 360 1.2 Own funds for solvency purposes in million 351 356 1.3 Own funds ratio 4) in % 43.0 45.5 Relative ratios Return on equity 5) in % 16.8 17.6 Cost/income ratio in % 72.1 70.4 Employees figures as of 31.12. Employees number 1,120 1,155 3.0 Employees full-time basis number 1,002.9 1,029.2 2.6 *) B2C: comdirect bank AG; B2B: ebase GmbH, excluding contributions from branch customers of Commerzbank AG 1) Equity ratio = Equity (excluding revaluation reserve)/balance sheet total 2) These figures are calculated on the basis of internal calculations; publication is voluntary and based on national implementation conversion and the figures are not reported to the Supervisory Authority 3) Risk weighted assets in accordance with Section 10 c of the German Banking Act (KWG) (intragroup receivables are zero weighted) 4) Own funds ratio = own funds for solvency purposes/(risk weighted assets + 12.5 x eligible amounts for operational risks) 5) Return on equity = pre-tax profit/average equity (excluding revaluation reserve) in the reporting period
> Contents 01 Strong products, strong performance 02 Foreword by the CEO 05 Interview with the Board of Managing Directors 08 Corporate Governance 09 Report of the Supervisory Board 13 Corporate Governance report 16 Compensation report 20 Group management report 20 Key developments 21 Group structure and business activities 24 Value-driven strategy and management system 28 Market environment 33 Business performance and earnings situation at the comdirect group 39 B2C business line 43 B2B business line 45 Financial situation and assets of the comdirect group 48 The share 51 Personnel report 53 Risk report 62 Opportunity report 64 Outlook 66 Supplementary report 66 Details in accordance with Sections 289, 315 of the German Commercial Code (HGB) and explanatory report of the Board of Managing Directors of comdirect bank 69 Declaration of the Board of Managing Directors on Section 312 of the German Stock Corporation Act (AktG) 70 Consolidated financial statements 72 Income statement 73 Balance sheet 74 Statement of changes in equity 75 Cash flow statement 76 Notes 128 Declaration of the Board of Managing Directors 129 Auditor s report 130 Glossary 134 Six-year overview of comdirect bank group 136 Financial calendar 2011 136 Contacts
> Strong products, strong performance B2C B2B Brokerage Investing Trading 10,000 funds 50 stock markets 550 securities eligible for savings plans worldwide LiveTrading 6,800 investment funds 188 ETFs Portfolio Executed Portfolio volume 16.1 orders 2010 volume 16.1 billion 13.2 Custody account billion 13.3 Banking 2009 2010 Average 2009 2009 2010 Current account & cards Fee-free accounts and cards Fee-free cash withdrawals worldwide Banking app ebase Depot flex Investment accounts Tagesgeld PLUS Fixed-term deposit Time deposit account Deposit Settlement Deposit volume 10.2 volume 9.1 billion account million 2009 2010 Call money Fixed-term deposit 26 2009 131 2010 Advice Anlageberatung PLUS Baufinanzierung PLUS Support in Marketing and Sales Customers Anlageberatung PLUS 400 1,300 Volume of building finance placed million 269 406 Number of partner organisations 113 126 2009 2010 2009 2010 2009 2010 Services and Infrastructure 24/7 Customer Service Powerful infrastructure Partner-specific configuration White labelling Service level (telephone) % 83 83 System availability % 99.9 99.9 Number of White labelling realised 33 42 2009 2010 2009 2010 2009 2010
Sometimes it s the major innovations that make a bank better and please its customers even more. And sometimes it s a lot of little steps that lead to the best products, easy access, convenience and personal contact. As always, any bank that aims to achieve the optimum for private customers and institutional partners has to be able to put itself in their position and constantly ask the question: What else does it take to make a bank that completely satisfies and inspires time after time? Although market surveys regularly confirm very high levels of satisfaction among our customers, comdirect employees always have plenty of ideas when it comes to this question. Their initiative is behind everything we have added since 2010 from the banking app, permanent flat rate fees, ebase Depot flex custody account, range of ETF savings plans, FlexIdent and customisable Informer through to online international bank transfers. And that s why their initiative is also included in this annual report. And it s good to know, since the list for 2011 is equally long.
2 Dr. Thorsten Reitmeyer CEO of comdirect bank AG When walking the fine line between short-term profitability and long-term increase in value, comdirect will continue to pursue its path of balanced growth. Dr. Thorsten Reitmeyer
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 3 Dear Shareholders, I could not have wished for a better handover. After just a few months in office as the new CEO of comdirect, it s already my pleasure to report on the successes of the past financial year. With an expanded range of products and services, faster growth and higher earnings, you don t have to look far for the reasons for this development. The bank is on a sound and profitable footing with clearly defined growth fields, a strong brand and strict cost control. You could almost be tempted to ask whether a new boss can make his mark here at all, or if all that s left for him to do is to tell everyone to keep up the good work. With its functioning business model, the comdirect group has performed well in a market environment that may have stabilised, but was still anything but easy. Organic growth in the number of customers was almost 150 thousand, surpassing the level in the previous year. Both business lines contributed to this development. In direct business with private investors (B2C business line), comdirect bank acquired new customers with its current account in particular. ebase is back on track for growth and has taken over the administration of around 50 thousand custody accounts of a renowned insurance company, thereby expanding the group of institutional partners in the B2B business line. Product penetration, the proportion of comdirect bank customers using more than one product in brokerage, banking and advice, improved from 48% to over 53%. This was due to the large number of current accounts and Tagesgeld PLUS accounts that were opened, which in turn increased the deposit volume. Strong fund inflows in custody accounts also showed that customers continue to place their trust in the comdirect group and are increasingly pooling their financial and securities transactions with the bank. All in all, assets under custody climbed by 7bn, to a record level of 42.5bn. At around 81m, the pre-tax profit exceeded both the previous year s figure and the profit target. And this was despite the decision taken in the middle of the year to more proactively seize growth opportunities and provide a larger marketing budget for these measures. The rise in net commission income is primarily attribu table to higher order figures and net fund inflows. Despite a moderate rise, interest rates remained low and net interest income did not match the previous year s figure, although there was a significant upturn in the second half of the year. Administrative expenses stayed close to the level of the previous year, despite the costs associated with the marketing offensive, reflecting the high degree of cost-efficiency in the comdirect group. These are some of the highlights of financial year 2010, which brings me back to my original question: Can we improve on this? The answer is yes we can, and we will.
4 Starting with our range of products: The wide-ranging initiatives in 2010 such as the flat-fee campaigns, banking app, 24/7 Customer Services, Informer Next Generation and ebase Depot flex custody account have made the com direct group even more attractive for both existing customers and new target groups. In the securities business, the task now is to strengthen and expand our market lead, since it is the core of our business and our brand value. Through a series of innovations in 2011, we will remain the partner of choice for traders, the key words here being trading in CFDs and limit functions in OTC trading. In banking too, we will continue our growth course with intelligent product features and optimum availability. We want to be the number one for more and more customers, not only as a direct bank, but also increasingly as a bank in general; in particular for those traditional branch bank customers who perhaps just need one final push to switch to comdirect. In our advice business, after focusing on direct bank-type models, our focus now is to set the course for growth. In B2B business, after linking the investment custody account with deposit business and realigning Sales, attractive growth paths have opened up. By networking with ebase, our partners are able to offer complete solutions for financial and securities investments to their end customers and seamlessly integrate them in their own offering. Through the combination of custody account services and B2B banking, we are more able than ever to interlink our B2C and B2B business activities. Ultimately, both brands, comdirect and ebase, stand for user-friendly and easy access to all key products, advisory services and market information related to financial asset accumulation for private households whether through comdirect itself or via our partners. This is closely connected with high demands in terms of sales strength and cost efficiency. And of course, with an innovative power that cannot be prescribed, but rather evolves from a culture of cooperation. The expertise and initiative of our employees continue to be critical to the success of the bank, as is the team spirit that spurs us on to do our best for our customers each and every day. But what do these many initiatives deliver for you, our shareholders? When walking the fine line between short-term profitability and long-term increase in value, comdirect will continue to pursue its path of ba lanced growth. The decisive factor is to transform the growth in the customer base, assets under custody and customer activity into increased profitability and thereby enhance the value of the bank on a sustainable basis. This is the target by which we will measure ourselves. I look forward to the continued work and cooperation with the employees in comdirect group and to the dialogue with you our shareholders. Sincerely yours, Dr. Thorsten Reitmeyer
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 5 > Interview: Showing initiative achieving profitable growth The Board of Managing Directors of comdirect bank talk about product and service initiatives for customers and partners, as well as the words of the year. Dr. Reitmeyer, Dr. Diekmann and Mr Strauß, if you had to choose your word of the year for 2010, what would it be? Reitmeyer: For most of the year I ve watched comdirect from the outside. What s always impressed me is the speed with which the bank achieves organic growth. After 71.1 thousand net new customers in 2009, the bank acquired 146 thousand this year, with 108 thousand of these in the B2C business line alone. And when you also see that the number of new custody accounts, current accounts and Tagesgeld PLUS accounts stands at over 300 thousand, which is triple the number of new customers in the B2C business line, then you almost have no choice but to select growth as the word of the year. Diekmann: On a par with this in my opinion is the word trust. In these times of unattractive market interest rates and ongoing problems in the financial markets the key factor here being the sovereign debt crisis investors entrusted us with over 1bn euros in new deposits and around 3bn euros in additional portfolio assets, not including price effects. This is by no means a given, and highlights the strength of our comdirect and ebase brands. By focusing on increasing value over the long term, the comdirect group has, on the whole, come through the financial market crisis very well. Dr. Thorsten Reitmeyer Strauß: But if you now ask yourself what the high level of awareness and popularity of our brands is based on, then the answer is inevitably the many initiatives of our employees that translate our programmes for the future, such as complus, into action on a daily basis. Initiative is my word of the year, as it has produced measurable customer benefits and new customer experiences, which in turn put us right up amongst the leaders in this competitive environment. These initiatives were quite varied: extended business hours in Customer Services, a new banking app, the new comdirect Informer and online international payment transfers. Many steps all in the same direction? Strauß: Most definitely yes. The new product features and customer services 24/7 business hours add up to maximum accessibility and minimum access obstacles. They deliver the highest level of customisation and personalised customer contact, as well as an efficient banking platform with intuitive user functions at high security standards. All of these are crucial if you want to attract and retain not only customers who already consider direct banking to be business as usual, but also convince those customers who, apart from the terms and conditions, are actually quite happy with their traditional bank. Reitmeyer: We managed this balancing act very well in 2010. The first banking app for the ipad from a German bank, longer customer services business hours, the convenient FlexIdent identity verification procedure all of these innovations earned us great praise from our customers and made the competition sit up and take notice. And I m convinced these have given some prospective customers food for thought. In any event, other steps, both big and small, will follow for existing and new customers. For example? Reitmeyer: In mobile banking and brokerage, we will certainly not leave it at the app for the iphone and ipad alone. Rather, we aim to develop a webapp which will be available on all smartphones and tablets. In just a few weeks time, we will be supplementing the customisable Informer with a comparable tool exclusively for ETF investors. And we will also be relaunching our website in 2011. comdirect.de will then offer an even better
6 Dr. Thorsten Reitmeyer, Carsten Strauß, Dr. Christian Diekmann Board of Managing Directors of comdirect bank AG (from left) overview as well as even greater customisation and interaction. Depending on user s respective priorities, the site will navigate customers even faster to the right product and the required market information, making it an even more attractive platform for all types of transactions. We spent considerably more on marketing, yet our pre-tax profit still surpassed the previous year. Dr. Christian Diekmann Many product initiatives in 2010 related to online banking. How do you manage to stay the number one partner for traders at the same time? Reitmeyer: In 2010, we ran the most comprehensive price campaign for traders in our history, with 35,000 products covering the whole range from equities and certificates to exchange traded funds and warrants. And we offer more securities that can be freely combined in savings plans than any other bank. But we can and want to do even more, and we will do so in 2011 with limit functions in OTC trading and trading in CFDs. That is why we are concentrating our product development on brokerage. This will enable us expand our offering for traders who once again voted us Online Broker of the Year in 2010.
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 7 Through Anlageberatung PLUS, comdirect provides real added value for securities investors and an attractive alternative to traditional advisory models. Are you happy with its success so far? Strauß: Anlageberatung PLUS stands for fair and product-neutral advice without any hidden commissions. In 2010, we proved that customers who implemented our system-backed recommendations saw their investments perform well. By the end of the year, our model had convinced more than 1,300 customers. Conveying the advantages of the independent advisory service and the transparent price model will continue to be a challenge in the future. We will have to focus on this, as well as on differentiating our offering. The new advisory models make only a moderate contribution to the bank s overall profit. When will that change? Strauß: It s already changing. Our Baufinanzierung PLUS increased the volume of building finance placed by more than half in 2010, breaking even less than three years after its launch. This combination of the maximum market transparency and independent advice is very popular and is an excellent fit for a direct bank such as ours, and highlights the potential that lies within our other advisory models as well. To leverage this and step up the pace of growth despite the complexity of the subject matter, we need to fine-tune the offering here and there. However, we firmly believe it will be successful. A great deal has changed with regard to business with institutional customers in 2010, such as the realignment of Sales at ebase and strengthening of the deposit business. What s next on the agenda here? Diekmann: ebase performed very well in 2010. Surplus capacity has been reduced, Sales has been realigned and the offering has been rounded out and expanded to include the first B2B-type banking solutions. The modified account and custody account architecture allows our partners to offer their end customers the complete range of products for asset accumulation from a single source and seamlessly integrate them into their own product assortment. The potential this offers is demonstrated not least by the takeover of custody account administration for around 50 thousand customers of Ampega- Gerling. The deposit volume at ebase is still moderate, but it increased more than five-fold in 2010. The combination of account and custody account is very promising and forms the basis for future product development and market strategies. Have the shareholders also benefited from growth in the two business lines? Diekmann: The good news for shareholders is that growth on the customer and product side has not been at the expense of profitability. On the contrary: We spent considerably more on marketing, yet our pre-tax profit still surpassed the previous year. This is attributed to a considerable increase in efficiency, with administrative expenses per customer in the B2C business line down by 9% a year on average since 2005. And because our dividend proposal is based on earnings per share, shareholders are participating directly in comdirect s success for the seventh time in a row. This means that shareholders can be happy with 2010, even though the bank s performance did not match that of the SDAX? Diekmann: Including the dividend payment, our shareholders achieved a plus of a good 15%. It is true that the SDAX recorded even stronger gains, but the picture was already very different again in the first few weeks of 2011, when, with a rise of 13.8% in January, comdirect shares outperformed the SDAX. Reitmeyer: The comparison with other banking stocks is more important to us and this shows that overall we have come through the financial market crisis very well. Naturally, a management team always sees latitude for share price gains, however it is not our task to comment on every price fluctuation, but rather to increase the value of the company over the long term. And that is what we are focusing on. Our new product features and Customer Services business hours have the same goal: maximum availability and minimum access obstacles. Carsten Strauß
Daniel Schneider comdirect is the German market leader in online securities business. Daniel Schneider, Head of Brokerage in Product Management, knows how the bank maintains its lead: with strong price campaigns for traders, an ever-expanding range of securities savings plans and new features.
Trading in more than 35,000 leveraged and investment products at a favourable flat fee for six months? Access to 300 funds, over 100 ETFs and more than 150 certificates for securities savings? Investment recommendations for ETF savings plans and fund investments free of charge? All of these were available in 2010 at comdirect, the German market leader in online securities business. comdirect won awards again in 2010. We defended our online broker of the year title awarded by brokerwahl.de. We were named best fund broker for the fifth time in a row. And we ranked second place for our business with certificates and exchange traded funds (ETFs). comdirect bank has been active in the online securities business for 15 years and during those years the bank has ranked very highly in service comparisons and investor surveys, often in first place. This is no coincidence, seeing as we expand our offering year after year, both on the technical and product side, for experienced traders and novices, for investors and customers with securities savings plans. For the traders among our Jubiläum customers, 2010 became one thing in particular: more favourable. As early as the first quarter, we celebrated 15 years of success in brokerage with the JubiläumsDepot (anniversary custody account). For a period of six months, new customers in securities business only paid half of the usual order fee; frequent traders with more than 1,250 orders per half year were even able to secure a long-term anniversary flat fee of 7.90 per trade. This has been very well received by customers, comments Daniel Schneider, Head of Brokerage in Product Management. Flat fee users executed considerably more orders on average than usual. The response to our large-scale partner campaign with BNP Paribas, Macquarie Oppenheim and Société Générale launched in the middle of the year was also excellent. By the end of 2010, more than 35 thousand products were traded via our OTC LiveTrading platform at a favourable flat fee of 3.90 (for order volumes over 1,000), including mini-futures on the DAX, warrants on equities and certificates on commodities. This considerably enhanced the appeal of OTC trading, says Schneider. And LiveTrading is already attractive: Its benefits particularly come to the fore when there are strong price fluctuations, as our 27 trading partners issue direct confirmations and refrain from partial executions.
Savings plans: combining securities at no additional cost We have extended our offering of ETFs eligible for inclusion in savings plans for those securities investors more interested in long-term asset accumulation rather than daily price fluctuations. And for good reason: listed index funds are transparent, straightforward and inexpensive, and are thus increasingly becoming an integral component of investment strategies. ETFs already accounted for around 6% of savings plan trades in 2010 and the trend is rising. There are now 105 ETFs available to securities savers, 18 more than before. This is one of the most varied offerings for ETF savings plans anywhere, says investment fund expert Henning Seeler. Whether S&P 500, small caps or currencies nearly all major investment strategies can be mapped. Customers can also save using more than 150 certificates and exchange traded commodities (ETCs). In contrast to actively managed funds, ETFs are not managed by a traditional fund manager looking for the best investment opportunities, but instead generally replicate an index and track its movement up and down. It is therefore all the more important to us that investors can easily diversify their portfolios even at low savings rates and that is exactly what our revised price model facilitates: up to five securities can be combined in one savings plan without incurring any additional costs. The new price model is also generally less expensive for most customers as the previous basic fee does not apply and savings plan transactions are now only charged at 1.5% of the order volume. Investors with high savings rates also benefit, since the maximum charge per execution and security is 4.90. Savings plans offering for ETFs and certificates/etcs Choice of 105 ETFs eligible for inclusion in savings plans Choice of more than 150 certificates/etcs eligible for inclusion in savings plans Fee for savings plan transactions: 1.5% of the order volume, maximum of 4.90 (per security and transaction) No basic fee Minimum investment: 25 (per security) monthly, bimonthly or quarterly Savings rate can be changed or suspended at any time No custody account charges if regular payments made into savings plan Up to five securities can be combined in one savings plan No notice periods Many customers are already utilising the option to combine several securities in one savings plan. comdirect also provides assistance in choosing the right mix and savers can access concrete investment suggestions on the website. The examples, which show three different investor types, were checked by the Institute for Asset Accumulation (Institut für Vermögensaufbau) in Munich. The right choice determines the investment performance, explains Seeler. Naturally this also applies to the active funds business. We have continually updated our FondsDiamanten fund offering a selection of 20 funds with above-average valuations using strict selection criteria; the same is also true for our AktivSparpläne savings plans launched a year ago, which enable investors to invest in 20 actively managed asset management and lifecycle funds in different investment classes with individually tailored savings rates and no front-end load. Attractive partner for traders and customers with securities savings plans For active traders, we will considerably expand brokerage services in 2011. For example, the limit functions familiar in stock exchange trading are set to be available in LiveTrading as well by the end of the year. And after extensive preparation, we are planning to launch trading in contracts for difference (CFD) in 2011. The successful flat-fee campaign will also be continued at the same attractive terms and conditions in 2010. For customers with securities savings plans, we will be expanding the range of ETFs as well as the associated information offering, and in the future there will be a special ETF Informer section.
8 > Corporate Governance Management and control at comdirect bank are based on generally accepted high standards and comply with the respective valid and applicable legal framework conditions and regulations as well as the requirements of the German Corporate Governance Code (GCGC), unless expressly excluded in the Declaration of Compliance. The recommendations and suggestions in the current version of the GCGC are implemented with only a few exceptions. With the support of the Corporate Governance Officer, the Board of Managing Directors and Supervisory Board closely mon i tor developments in the ongoing Corporate Governance discussion and systematically refine the standards in place at comdirect bank. Details regarding the tasks of and cooperation between the executive bodies are provided in the Corporate Governance statement, which is available as a download on our website. The principles governing risk management and control are outlined in the risk report (pages 53 to 61). Information on the compliance function is contained in our Corporate Governance report on pages 13 to 15, while our communication with shareholders is detailed in the section The share in the group management report (pages 48 to 50). The guiding principles of our responsible company management are cooperation based on trust between the Board of Managing Directors, which manages the company, and the Supervisory Board, which advises and monitors the Board of Managing Directors and exercises its control function efficiently and independently, focus on company interests at all times, responsible and effective risk management, compliance with and monitoring of legal requirements and supervisory regulations, as well as timely and transparent communication both internally and outside the company. These principles are firmly established in all areas of the bank and determine the framework parameters for strategic decisions and business policy.
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 9 > Report of the Supervisory Board Cooperation between the Board of Managing Directors and the Supervisory Board The Supervisory Board worked in close partnership with the Board of Managing Directors of comdirect bank in financial year 2010, providing regular advice and monitoring the management of the company. We have comprehensively performed all of the duties incumbent upon the Supervisory Board under the legal framework conditions and regulations, the German Corporate Governance Code (GCGC), the bank s Articles of Association and the Rules of Procedure of the Supervisory Board. The Board of Managing Directors provided us with regular written and oral reports on the situation and development of comdirect bank and its subsidiaries, European Bank for Fund Services GmbH (ebase) and, up until its merger into comdirect on 25 June 2010, comdirect private finance. We requested and received full and timely reports on all major business transactions as well as fundamental issues concerning the business policy, management and corporate planning. We discussed the status of their implementation with the Board of Managing Directors at regular intervals. We were directly involved in all company decisions of vital importance, especially including all measures which may significantly affect comdirect bank s earnings situation, financial situation and assets. As part of our monitoring and control function, all documents submitted or presented to us were checked for plausibility. Questions on material issues were followed up regularly with the relevant contact persons of comdirect bank, particularly the Board of Managing Directors. In addition, the Chairman of the Supervisory Board was continuously given detailed information on all events that were of significant importance for the assessment of the situation and development as well as for the management of the company. He maintained frequent contact with the CEO and in particular, conferred with him with respect to the strategy, business development and risk management of comdirect bank. In addition, the Chairman arranged for important matters to be addressed by the Supervisory Board committees. Main focus in 2010 As in the previous year, the Supervisory Board met at five regularly convened meetings in financial year 2010 on 8 March, before and after the annual general meeting on 7 May, 19 August and 18 November 2010. One central topic related to the progress reports on the complus programme launched in 2008, through which the comdirect group intends to continue its dynamic growth in the B2C business line, which includes further developing the product and service offering as well as establishing and expanding independent and transparent advisory models. Another focus was the strategic further development of ebase. The Board of Managing Directors reported to us in detail about the progress of the integration and restructuring process. Following completion of the withdrawal from advisory services through local offices, comdirect private finance AG was merged into comdirect bank AG on 25 June 2010. We were regularly informed of the progress of the process related to the merger adopted all of the necessary resolutions. As part of our deliberations, we obtained information on the bank s development on the basis of the medium-term strategy and also looked at the agenda for the following year in detail. The Supervisory Board also regularly examined the risk position of the bank, with one of the main focuses being the discussion on the overall risk strategy in line with the minimum requirements for risk management (MaRisk). We were also provided with information from the Board of Managing Directors on the subject of online security. Furthermore, the comdirect bank Board of Managing Directors kept us informed about the performance of key indicators and their impact on the bank s earnings situation, financial situation and assets. In this context, we also monitored the market and competitive environment of comdirect bank. Based on a recommendation by the Presiding Committee of the Supervisory Board, we specified the criteria to be used to assess the variable compensation component for the Board of Managing Directors for financial year 2010.
10 In addition to face-to-face meetings, the Supervisory Board also adopted resolutions within the scope of a written ballot procedure or conference calls, including resolutions on the reallocation of granted loans as well as changes in the Board of Managing Directors of comdirect bank AG (see page 12). Furthermore, the Supervisory Board also acknowledged the draft agenda for the annual general meeting together with proposals to be put to the annual general meeting, as well as the Corporate Governance Report in advance of the relevant resolution adoption process in the accounts meeting. Activities of the committees In order to improve the efficiency of Supervisory Board activities and to deal with complex issues, some matters were referred to the Presiding Committee or Audit Committee for a decision or for the purpose of preparing resolutions. The Audit Committee of the Supervisory Board met five times in the reporting year on 8 March, before and after the annual general meeting of the bank on 7 May, 19 August and 18 November. The meetings were also attended by a representative from the auditors commissioned for the year-end audit and for the audit review of the interim financial statements respectively. At the meeting on 8 March 2010, the Audit Committee of the Supervisory Board dealt with the preliminary examination of the financial statements and dependency report as well as the neutrality and independence of the auditors of the annual and consolidated financial statements. Topics discussed at the other meetings included the report from the auditors conducting the audit of the interim financial statements. At all meetings, the Audit Committee of the Supervisory Board discussed in depth the status and further development of risk management and the risk position of the bank and its subsidiaries. With regard to the ongoing financial market crisis, the focus was also on the current market and credit risk situation in comdirect s Treasury portfolio as well as the investment of deposits with other companies in the Commerzbank Group and other counterparties in each case. The underlying investment strategy and the plans for greater utilisation of the Commerzbank Group for money market and capital market transactions were regularly discussed by the Audit Committee. Furthermore, the Audit Committee also thoroughly examined essentially credit risks related to bank bonds from the PIIGS eurozone countries. The Audit Committee received the Compliance Officer s report and was informed about the overall audit report from Internal Audit for the financial year. There were no major findings in the reporting year. At the meeting of the Audit Committee on 7 May 2010, the Chairman was authorised to sign the contract commissioning the auditors selected by the annual general meeting to audit the annual and consolidated financial statements, including the management reports as at 31 December 2010. Furthermore, the Audit Committee of the Supervisory Board examined the results of the annual custody account/securities Trading Act (WpHG) review and the main points of the audit of the 2010 financial statements and the implementation of additional requirements arising from the Accounting Law Reform Act (BilMoG). It also approved the commissioning of PricewaterhouseCoopers Aktienge sellschaft Wirtschaftsprüfungsgesell schaft, Frankfurt/Main, Hamburg branch, with tax advisory services for financial year 2011. The Presiding Committee of the Supervisory Board adopted the following resolutions in 2010 after extensive deliberation in each case. These related to the recommendation to the Supervisory Board to determine the variable compensation for members of the Board of Managing Directors for financial year 2009, as well as the recommendations to the full Supervisory Board regarding changes in the Board of Managing Directors. The Presiding Committee also approved the acceptance of seats on other boards by members of the Board of Managing Directors as well as the reallocation of loans granted to the Commerzbank Group. A detailed report on the activities of the committees was provided at the full Supervisory Board meeting. The Supervisory Board has not formed any committees other than the Presiding Committee and the Audit Committee. Efficiency of Supervisory Board activities The Supervisory Board reviews the efficiency of its activities on an annual basis. Following the extensive efficiency review conducted in March 2009, we discussed the current status in our meeting on 8 March 2010. The activities of the Supervisory Board and its committees were once again unanimously judged to be efficient. To prepare for the detailed efficiency review in March 2011, it was decided in the meeting on 18 November 2010 to conduct the review with the aid of a questionnaire, as has been done in the past.
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 11 No conflicts of interest were reported with regard to a member of the Supervisory Board. The Corporate Governance Officer provided a comprehensive written report to the Supervisory Board and prepared the Declaration of Compliance with the German Corporate Governance Code from the Board of Managing Directors and the Supervisory Board in accordance with Section 161 of the German Stock Corporation Act (AktG). The declaration was approved at our meeting on 10 March 2011. In line with the recommendation in the GCGC, we adopted a resolution on the objectives for the composition of the Supervisory Board at the meeting on 18 August 2010. The Audit Committee of the Supervisory Board commissioned the auditors elected by the annual general meeting on 7 May 2010, PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, Frankfurt/Main, Hamburg branch, to conduct the audit for financial year 2010. We have obtained a certificate of independence from the auditors. No business, financial, personal or other relationships exist between the auditors and their executive bodies and audit managers or between the auditors and comdirect bank and its Board members which could give rise to doubts with regard to their independence. Approval of the annual financial statements and dependency report The annual financial statements of comdirect bank (in accordance with the German Commercial Code, HGB), the management report of comdirect bank (in accordance with the German Commercial Code, HGB) and the consolidated financial statements and group management report (in accordance with IAS/IFRS), including the underlying bookkeeping for financial year 2010, have been examined and audited by the auditors, who issued an unqualified audit certification. The above documentation, the audit reports and the proposal of the Board of Managing Directors for the appropriation of the distributable profit were promptly made available to the members of the Supervisory Board. The German public accountants who sign the annual financial statements took part in the meeting of the Audit Committee on 10 March 2011 and the subsequent meeting of the Supervisory Board dealing with the approval of the annual accounts. They reported on the key findings of the audit and answered questions. The result of the audit was discussed thoroughly with the Audit Committee. The Audit Committee then proposed to the Supervisory Board that the annual financial statements be approved. The Supervisory Board has acknowledged the results of the audit. Within the scope of the legal provisions, it has examined the annual financial statements and management report, the consolidated financial statements and group management report and the proposal of the Board of Managing Directors for the appropriation of the distributable profit and raised no objections. In its meeting on 10 March 2011, the Supervisory Board approved the annual financial statements and consolidated financial statements prepared by the Board of Managing Directors. Accordingly, the annual financial statements are regarded as adopted. The Supervisory Board endorses the proposal for the appropriation of the distributable profit. Furthermore, the report of the Board of Managing Directors on the bank s relationship with affiliated companies was submitted to the Supervisory Board together with the associated auditors report. After completing the audit, the auditors raised no objection to the report of the Board of Managing Directors and issued the following unqualified certification: After conducting our audit in accordance with the professional standards, we confirm that the actual details of the report are accurate and the fees paid by the company for the legal transactions detailed in the report were not disproportionately high, nor were any disadvantages compensated. The Supervisory Board examined the report of the Board of Managing Directors and approves the report as well as the auditors findings of the audit. After completing its examination, the Supervisory Board finds no cause for objection to the concluding statement concerning the relationship with affiliated companies made by the Board of Managing Directors in the report. As part of the audit, the auditors also assess whether the Board of Managing Directors has implemented a monitoring system and has fulfilled the legal requirements concerning the early detection of risks that are likely to threaten the existence of the company. The auditors have confirmed that the risks described in the management report are presented accurately and that the measures taken by the Board of Managing Directors in accordance with Section 91 (2) of the German Stock Corporation Act (AktG) are conducive to early detection of developments that are likely to threaten the continued existence of the company. Furthermore, the auditor confirmed the effectiveness of the accounting-related internal control system with a positive assessment.
12 Changes in the Board of Managing Directors The former CEO, Michael Mandel, resigned as CEO with effect from the end of 30 November 2010 to take up the position as divisional board member for Private, Business and Wealth Management Customers at Commerzbank AG. Alexander Boldyreff resigned from the Board of Managing Directors with effect from the end of 31 October 2010 to take up the position as CEO of TeamBank AG in Nuremberg. The Supervisory Board approved both resignations upon the recommendation of the Presiding Committee and appointed Dr. Thorsten Reitmeyer to the Board of Managing Directors as CEO for a period of three years with effect from 1 December 2010. In addition to extensive professional expertise, Dr. Reitmeyer has many years of experience in the financial sector. The departments overseen by Mr Boldyreff were taken over by CEO Michael Mandel and member of the Board of Managing Directors Carsten Strauß. Following the departure of Michael Mandel, his divisions transferred to the new CEO Dr. Reitmeyer. As CEO, Dr. Reitmeyer is responsible for the Business Development, Marketing & Sales, Product Management & Treasury, and Corporate Communications divisions. Dr. Christian Diekmann continues to be responsible for Finance, Controlling & Risk Management and Institutional Business as well as Internal Audit, Legal Services/Com pliance and as Chairman of the Supervisory Board of ebase for the business line B2B. Carsten Strauß is in charge of Customer Services, Human Resources & Organisation, Process Management and IT as well as Investment Advice and Building Finance. We would like to thank Michael Mandel and Alexander Boldyreff for their strong commitment and outstanding performance for comdirect bank, its employees and its shareholders. We would like to take this opportunity to thank Mr Müller-Gebel for his dedicated commitment to comdirect bank AG since its establishment and for his outstanding performance for the Supervisory Board of comdirect bank AG and its shareholders. Changes in the Board of Managing Directors of Commerzbank AG led to corresponding changes in the internal arrangements of the Supervisory Board of comdirect bank AG and in connection with this, to changes in the composition of the committees of the Supervisory Board. At the meeting of the Supervisory Board on 18 November 2010, Mr Martin Zielke was unanimously elected Chairman of the Supervisory Board and Dr. Achim Kassow his Deputy. Mr Zielke is consequently also the Chairman of the Presiding Committee of the Supervisory Board. As a result of the election of Mr Zielke as Chairman of the Supervisory Board, Dr. Kassow was unanimously elected as Chairman of the Audit Committee at the meeting of the Audit Committee on 18 November 2010. Thanks for excellent performance We would like to thank the members of the Board of Managing Directors and all of the employees of comdirect bank for their continued excellent performance in financial year 2010. Furthermore we would like to thank the staff council for their constructive cooperation at all times. Frankfurt, 10 March 2011 The Supervisory Board Changes in the Supervisory Board Mr Klaus Müller-Gebel resigned from the Supervisory Board and Audit Committee of comdirect bank AG at the end of the annual general meeting on 7 May 2010. Mr Georg Rönnberg was byelected to the Supervisory Board by the annual general meeting. In the meeting of the Supervisory Board immediately following the annual general meeting, Mr Georg Rönnberg was elected as a member of the Audit Committee of the Supervisory Board of comdirect bank AG. As a certified public accountant, Mr Georg Rönnberg has many years of experience in the application of financial reporting standards and internal control procedures in addition to extensive expertise.
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 13 > Joint report by the Board of Managing Directors and the Supervisory Board of comdirect bank in accordance with Section 3.10 of the German Corporate Governance Code Explanations to the new version of the Code The GCGC was supplemented with effect from 26 May 2010, primarily with the aim of facilitating the consideration of diversity when filling supervisory board, management board and management positions in companies, and in particular to strive for an appropriate degree of female representation. Sections 4.1.5 (When filling managerial positions in the enterprise, the Management Board shall take diversity into consideration) and 5.1.2 (When appointing the Management Board, the Supervisory Board shall also respect diversity) are implemented in full. The first half of 2011 will see the start of a project aimed at increasing the proportion of women in managerial positions in the comdirect group. In the future, we will report on the progress of the project in the Corporate Governance report. At its meeting on 19 August 2010, the Supervisory Board drew up the person specification for its members, including its objectives for the composition of the executive body. The objectives for the composition of the Supervisory Board are as follows: The aim is for the composition of the Supervisory Board to ensure the qualified supervision of and advice for the management of the bank by the Supervisory Board, whereby it cannot be expected that every single member of the Supervisory Board possesses all the necessary expertise, skills and experience to the full extent. Nevertheless, at least one member of the Supervisory Board should be available as a competent contact partner for each aspect of Supervisory Board activity so that the extensive expertise and experience is reflected by the members of the Supervisory Board as a whole. However, certain indispensible general knowledge, expertise and experience is required of every member of the Supervisory Board. Taking into account the general age limit of 72 years set by the Supervisory Board, candidates are to be proposed who through their integrity, motivation, independence and character are in a position to perform the tasks of a Supervisory Board member of a modern retail bank and to maintain and enhance the reputation of comdirect bank in the public domain. Diversity has to be considered when proposing candidates for election. Against the backdrop of the ongoing socio-political debate, no concrete targets were set for the appropriate representation of women on the Supervisory Board, so that despite its commitment to the principle of diversity, comdirect bank deviates from Section 5.4.1 clause 3 of the GCGC. Nonetheless, the Board of Managing Directors and the Supervisory Board of comdirect will take greater account of diversity with regard to the composition of the Board of Managing Directors, when filling managerial positions in the enterprise and when proposing candidates for election to the Supervisory Board. As in the previous year, the second deviation relates to Section 5.3.3 of the Code. According to this recommendation, the Supervisory Board should form a nomination committee which is composed solely of representatives of the shareholders and which suggests suitable candidates to the Supervisory Board for its election proposals to the annual general meeting. The Supervisory Board of comdirect bank comprises a total of six members, four of whom are shareholder representatives. Forming an additional committee from its membership would in our opinion be an excessive structuring of the Board. In addition, there are no apparent reasons as to why the full Supervisory Board should not itself be able to achieve the improved transparency of the selection procedure intended by the Government Commission through the introduction of nomination committees. Further information on the German Corporate Governance Code In addition to the Declaration of Compliance, each year the Board of Managing Directors and the Supervisory Board provide information about compliance with the suggestions in the GCGC. We also comply with the suggestions with only a few exceptions. The deviations arise where implementation of the corresponding suggestions does not appear reasonable in comdirect bank s specific situation or where the additional benefit to shareholders appears doubtful. In Section 3.6, the GCGC suggests that in supervisory boards with codetermination, representatives of the shareholders and the employees should prepare the supervisory board meetings separately. As in-depth exchanges of information take place in the Supervisory Board of comdirect bank, we consider such preparations to be unnecessary. Meetings are only prepared separately when required. Contrary to the suggestion in Section 5.4.6 clause 5 of the GCGC, profit-oriented compensation of the Supervisory Board does not contain a component that relates to the long-term success of the company, but rather is tied to the possible payment of a dividend. We consider the different calculation basis for performance-related components for the compensation of the Board of Managing Directors and the Supervisory Board to be appropriate.
14 The Corporate Governance statement, including the Declaration of Compliance, adopted on 10 March 2011 at the accounts meeting of the Supervisory Board as well as the Corporate Governance and compensation report for financial year 2010 are available on the company website at www.comdirect.de/ir. Previous versions of the above documents as well as the Articles of Association and the full German Corporate Governance Code can also be viewed there. In addition, the website includes information on the latest changes to our Corporate Governance standards. Compliance The sustainability, effectiveness and independence of the compliance function at comdirect bank (Compliance Office) as well as the responsibilities, rights and obligations of this office are regulated in the compliance policy. The role of the Compliance Officer is assumed by the Head of Legal Services/Compliance; the Compliance Officer is also the Money Laundering and Corporate Governance Officer at comdirect bank. The responsibilities of the Compliance Office include, amongst others, the prevention of money laundering, insider trading and market manipulation as well as fraud and corruption. In addition, the Office ensures compliance with obligations under securities trading law and data privacy and protection legislation. The Compliance Officer reports to the Board of Managing Directors and the Supervisory Board at least once a year and is also the contact for the regulatory authorities and other public agencies. The organisational structure and set-up of the Compliance Office as well as the knowledge, skills and expertise required of employees also meet the Minimum requirements for the compliance function and additional requirements governing rules of conduct, organisation and transparency obligations pursuant to Sections 31 et seq. of the Securities Trading Act (WpHG) MaComp, which were specified in a circular from the Federal Financial Supervisory Authority (BaFin) in June 2010. Thus the Compliance function is responsible in particular for monitoring whether the controlling specified in the work and organisational instructions is carried out correctly and regularly by the specialist departments. To this end, the number of employees in the Compliance Office of comdirect bank AG was increased. Current legislative processes are monitored closely and analysed regularly with respect to implementation requirements at comdirect bank. Implementation and other optimisation requirements identified in the compliance management process are complied with immediately. In line with legal requirements, we implemented the law that came into force at the end of October 2009 to enact the civil law portion of the EU Payment Services Directive by mid-2010. The law also contains rules to implement the EU Consumer Credit Directive in German law and revise regulations on the right of revocation and return. In accordance with the provisions of the law to reform account attachment protection, we have been offering an attachment protection account (P-account) since the start of July 2010. Under Section 850c of the Code of Civil Procedure, this converted current account contains an amount that is exempt from attachment. Furthermore, we have already taken measures with regard to two draft laws that had not yet come into force by the end of 2010. These relate on the one hand to a project to implement the Investor Protection and Function Improvement Act. As discussions currently stand, the Act requires, amongst other stipulations, processing of unit certificate acquisitions and redemptions for open-ended property funds, taking account of minimum holding and cancellation periods, the provision of product information sheets or in the case of investment funds, the required key investor information as part of the provision of investment advice, and notification to the Federal Financial Supervisory Authority (BaFin) of the investment advisers acting for the comdirect group and the Compliance Officer as well as any customer complaints. The measures also relate to the law implementing the second E-Money Directive and resultant extended duty of care to protect against money laundering and the financing of terrorism. Pursuant to the regulations of the new Section 25c of the German Banking Act (KWG), these measures are to be coordinated by the Money Laundering Officer. A whistle blowing system is intended to support even more active prevention against acts of financial crime. Using the Web-based system, employees, customers and other stakeholders of the bank can report suspicious cases relating to fraud, corruption, theft, breach of trust and other offences and remain anonymous by request. This provides an additional and efficient means of communication alongside the established reporting and contact channels via the Internal Audit or Compliance department for example.
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 15 Directors dealings The following notifiable acquisition and disposal transactions were carried out by Board members and executives in special positions at comdirect bank in financial year 2010: Date Name Position Transaction Price No. Amount 23.02.2010 Richard Welge Member of the Management Board team 26.03.2010 Richard Welge Member of the Management Board team 26.03.2010 Richard Welge Member of the Management Board team 29.04.2010 Henning Rusch Member of the extended Management team Disposal 7.273 2,500 18,182.50 Disposal 7.336 500 3,668.00 Disposal 7.37 1,000 7,370.00 Disposal 8.131 5,000 40,655.00
16 > Compensation of the Board of Managing Directors and Supervisory Board The following explanation regarding the structure of the compensation system and compensation of the Board members as part of the Corporate Governance report is also a component of the audited group management report. Compensation of the Board of Managing Directors The compensation of the Board of Managing Directors of comdirect bank is specified and reviewed regularly by the Supervisory Board. All compensation components are appropriate both individually and as a whole in relation to the tasks and services of the respective member of the Board of Managing Directors. The variable compensation is linked to sustainable corporate development and also has a multi-year assessment basis in accordance with regulatory requirements. The compensation system for the Board of Managing Directors is currently being revised in light of the changes in legislation, especially the law passed in June 2010 pertaining to the regulatory requirements imposed on the compensation system of banks and insurance companies as well as the associated executive compensation regulation for banks. The overall compensation comprises the following components: a non-performance related fixed compensation, a variable compensation component linked to the success of the company and personal performance, as well as a sustainable component with longterm incentive effect and risk elements. Furthermore, the members of the Board of Managing Directors receive a company pension in respect of their activities for comdirect bank. The non-performance related fixed compensation comprises an annual fixed salary plus benefits. Without prejudice to the possibility of a review by the Supervisory Board, the annual fixed salary for members of the Board of Managing Directors is set for the entire term of their respective contract of employment and is paid in twelve monthly instalments. The salary is based on the duties of the individual member of the Board of Managing Directors and the current economic position and future prospects of the bank, as well as the level of compensation paid in peer companies. In addition to the fixed salary, the members of the Board of Managing Directors receive fringe benefits in the form of payments in kind which essentially comprise the payment of expense allowances and insurance premiums and the taxes and social security contributions attributable to those. The actual amount varies according to the individual situation of the respective member of the Board of Managing Directors. Moreover, the Commerzbank Group maintains a D&O insurance policy with deductible, which includes the members of the Board of Managing Directors and Supervisory Board of comdirect. The insurance premium for the Managing Directors and Supervisory Board members of comdirect bank amounted to 49 thousand in the reporting year and was paid by the company. No loans or advance payments were granted in the reporting year. The variable component is based on the business performance of the company and the attainment of individual targets in the relevant financial year, which are aligned with the bank s strategic targets. The assessment and calculation is based on both positive and negative developments. The determining factors for the performance-related components essentially comprise both profit criteria and the attainment of defined growth criteria. The respective targets are agreed on annually by the Board of Managing Directors and the Supervisory Board. At the end of the financial year, the Supervisory Board examines the extent to which the targets have been achieved and sets the level for the performance-related component. The sustainable component with the multi-year assessment basis as well as long-term incentive effect and risk elements in financial year 2010 is based on the Long Term Incentive Programme (LTIP). As beneficiaries under the LTIP, members of the Board of Managing Directors of comdirect bank have received an allocation of virtual, non-tradable shares (performance shares) in annual tranches since 2005. These comprise the conditional right to a cash payout after a three-year waiting period. The amount of the cash payment per performance share depends both on the extent to which the original performance targets were achieved and on the share price at the end of the waiting period. The performance targets defined when the programme was set up are based on the development of the total shareholder return (TSR), a key figure which, in addition to share price performance, also takes account of the dividends paid during the waiting period. The number of performance shares to be paid out depends in equal measure on the TSR outperformance targets compared to the DAXsector Financial Services Performance Index and the absolute increase in TSR for comdirect bank shares. The hurdles for both performance targets are high. With regard to TSR outperformance (subset A), the performance shares are only of value if comdirect
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 17 bank shares have performed at least as well as the comparative index over the three-year waiting period. If the comdirect bank share price, including dividends paid, has increased in absolute terms in the same period (subset B) by at least 25% as compared to the price on issue, this subset also becomes of value. The total payout from the LTIP is capped. If the performance targets set at the start of the plan are not achieved, the performance shares lapse at the end of the waiting period. Both subsets comply with the requirements of the Act on the Appropriateness of Management Board Compensation (VorstAG) and the GCGC, which stipulate that the compensation structure must be aligned with sustainable development of the company and the individual components must be based on a multi-year assessment. The terms and conditions for allocating performance shares, the hurdles and the time parameters are listed in the notes starting on page 84. The volume of the LTI component, called the LTI target value, for each member of the Board of Managing Directors generally amounts to 25% of the individual fixed salary. The individual number of performance shares is calculated by dividing the LTI target value and fair value of a performance share as of the date of issue. This fair value is determined by an external expert using an option valuation model prior to setting up each tranche. Alexander Boldyreff resigned as a member of the Board of Managing Directors with effect from the end of 31 October 2010. Mr Boldyreff received payments from comdirect bank up until his departure from the company. The claims under tranche 2009, the component with long-term incentive effect, lapsed upon his departure. As part of the rescission agreement, the claims to variable compensation were settled pro rata with a one-off payment in the amount of 75 thousand. This payment is shown in the table on page 18 under variable compensation. The pension rights of Mr Boldyreff acquired as of 31 October 2010 remain in force. Details of the payments made for financial year 2010 are shown in the table on page 18. Michael Mandel resigned as CEO with effect from the end of 30 November 2010 to assume a new position in the Commerzbank Group. Mr Mandel received payments from comdirect up until his departure from the Board of Managing Directors. Under the rescission agreement, it was regulated that Mr Mandel s claims to variable compensation from comdirect bank for financial year 2010 remain in force pro rata and will be paid after attainment of the goals has been ascertained. The payment specified by the Supervisory Board in this regard is shown in the table on page 18 under variable compensation. As of November 2010, Mr Mandel received a one-off payment of an amount of 55 thousand. This payment is shown in the table on 18 under variable compensation. The pension claims of Mr Mandel were transferred from comdirect bank to Commerzbank as part of his intragroup move. Claims arising from the component with the long-term incentive effect remain in force. The performance shares granted as part of the LTIP do not lapse in the event of an intragroup move. Mr Mandel will therefore continue to hold performance shares from tranches 2008 and 2009. These will only be paid out if the defined profit targets are attained upon expiry of the waiting period and Mr Mandel is still with the Commerzbank Group. Consequently, there may be further payments under the LTIP in 2011 and 2012. Details of the payments made for financial year 2010 are shown in the table on page 18. Dr. Thorsten Reitmeyer was appointed CEO for a period of three years with effect from 1 December 2010. His pension claims of Dr. Reitmeyer were transferred from Commerzbank to comdirect bank at the same time. The Supervisory Board has resolved not to take Dr. Reitmeyer into account when granting tranche 2010 of the LTIP. The overall compensation paid for activities during financial year 2010 for the active members of the Board of Managing Directors amounted to 1,590 thousand (previous year: 1,723 thousand). The figure for the previous year includes contributions from members of the Board of Managing Directors who departed in financial year 2009. Details on the composition of the overall compensation as well as the pensions of the members of the Board of Managing Directors are shown on an individual basis in the table on page 18. For their work at comdirect bank, the members of the Board of Managing Directors receive a pension entitlement, whereby the active members of the Board of Managing Directors acquire a claim to a capital payment. The company has recognised pension provisions for these future claims on the basis of the International Financial Reporting Standards (IFRS), the level of which depends on the number of service years, the pensionable salary and the current actuarial interest rate. These are calculated according to the projected unit credit method on the basis of actuarial opinions by an independent actuary (see note (19), starting on page 81). In the reporting year, pension obligations under IFRS totalled 160 thousand (previous year: 222 thousand).
18 sation thousand Annual income Performance shares granted in financial year Non- Value of Variable Number Value at variable benefits components time of issue Overall compen- Pensions Pension Claims obligation as of 31.12. (DBO) under IFRS as of 31.12. Dr. Thorsten Reitmeyer 2010 30 3 32 0 0 65 87 148 (from 1 December 2010) Dr. Christian Diekmann 2010 170 6 156 7,077 43 375 20 31 (from 1 May 2009) 2009 114 65 104 8,436 43 326 7 7 Carsten Strauß 2010 145 5 174 6,022 36 360 30 70 2009 145 15 203 7,179 36 399 17 36 Michael Mandel (until 30 November 2010) Alexander Boldyreff (from 1 July 2009 until 31 October 2010) 2010 202 7 337 0 0 546 0 0 2009 220 24 364 10,892 55 663 191 31 p.a. 2010 167 2 75 0 0 244 23 25 2009 100 1 59 9,921 50 210 7 7 Total 2010 714 23 774 13,099 79 1,590 160 2009 579 105 730 36,428 184 1,598 222 If comdirect bank prematurely terminates the appointment to the Board of a member of the Board of Managing Directors, the respective contract of employment is in principle continued until the end of the original term of office. The compensation of the member of the Board of Managing Directors released from office is paid for the remaining term of the employment contract. The fixed compensation would be paid for Mr Strauß and Dr. Diekmann in full for Mr Strauß and in the amount of 50% for a maximum of 24 months for Dr. Diekmann. Dr. Reitmeyer would receive a maximum amount of up to two years compensation, with the calculation based on the compensation for the last financial year prior to termination. There is no entitlement to further remuneration where the termination takes place for good cause. There may be a severance settlement in the event of premature termination of employment resulting from an individually agreed-on rescission agreement. In the past financial year, no member of the Board of Managing Directors has received payments or corresponding obligations from a third party in relation to their activities as a member of the Board of Managing Directors. The third tranche under the LTI programme became due in 2010. As a result of the relative performance of comdirect bank shares, Mr Strauß received a payment of 18 thousand. The shares were allocated to him in his capacity as divisional manager. Members performing board functions at subsidiaries only received reimbursement for expenses. The overall compensation for former members of the Board of Managing Directors amounted to 347 thousand (previous year: 263 thousand) in the financial year. In 2010, the payment made to former members of the Board of Managing Directors under the LTI programme totalled 149 thousand. Up to 2012, further payments to former members of the Board of Managing Directors under the LTI programme could become due from the remaining tranches. As of 31 December 2010, the pension obligations to former members of the Board of Managing Directors pursuant to IFRS totalled 3,405 thousand (previous year: 3,230 thousand). Compensation of the Supervisory Board The compensation of the Supervisory Board is stipulated in the Articles of Association. In addition to reimbursement of expenses, the individual members of the Supervisory Board receive a fixed compensation of 10,000 at the end of the financial year, with the Chairman of the Supervisory Board receiving triple that amount and his Deputy one and a half times that amount. If a member of the Supervisory Board is also a member of a Supervisory Board committee, he or she additionally receives a quarter of the rele
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 19 vant fixed compensation and the committee chairman receives a further quarter. A member of the Supervisory Board may receive a maximum of two and a half times the fixed compensation, i.e. a maximum of 25,000. The maximum for the Chairman of the Supervisory Board is 75,000 and 37,500 for his Deputy. In accordance with GCGC, the members of the Supervisory Board also receive a variable compensation payment. This component is dependent on the dividend distributed to the shareholders. No variable component is paid for a dividend of up to 4% of the share capital, which equates to 0.04 per share. The Supervisory Board as a whole receives 1,500 for each half a percentage point that the dividend exceeds this basic return on the share capital of 4%. For financial year 2010, a dividend of 0.42 per share, or 42% of the share capital, will be proposed to the annual general meeting. If approved by the annual general meeting, the variable compensation component paid to the Supervisory Board will amount to 133 thousand. Pursuant to a resolution by the Supervisory Board, this sum will be divided among the members of the Supervisory Board, irrespective of their activities on committees, in accordance with the ratio for non-variable compensation. The compensation paid to individual members of the Supervisory Board, including if necessary statutory VAT accrued on the compensation, is shown in the following table. thousand Non-variable Variable components components Remuneration for Total committee activities 2010 2009 2010 2009 2010 2009 2010 2009 Martin Zielke 18 12 24 16 12 6 54 34 Dr. Achim Kassow 34 36 45 47 25 27 104 110 Frank Annuscheit 10 10 13 13 0 0 23 23 Thorben Gruschka (from 6 May 2009) 12 8 16 10 0 0 28 18 Angelika Kierstein 12 12 16 16 3 3 31 31 Georg Rönnberg (from 7 May 2010) 8 0 10 0 2 0 20 0 Klaus Müller-Gebel (until 7 May 2010) 6 18 9 23 3 9 18 50 Mitja Sack (until 6 May 2009) 0 4 0 5 0 0 0 9 Total 100 100 133 130 45 45 278 275
Andrea Wöhlcke Competent, friendly and fast: This is how our Customer Services are rated by customers, and Andrea Wöhlcke, an account manager in Customer Services, and her colleagues ensure that it remains this way. Now Customer Services are available around the clock, whether by telephone, email or fax.
It s easy to remember when comdirect s Customer Services are open: always. Friendly and expert assistance around the clock, every day of the year. This makes it even easier to access our range of products and services just like our convenient FlexIdent identity verification process when opening accounts and custody accounts. At the place and time of the customer s choosing, anywhere in Germany no other direct bank in Germany currently offers this service. A call comes in at 11.27 p.m. and the 32-year old customer sounds distressed. She is at the Lisbon Rossio train station and her handbag has just been stolen with her purse and all her debit and credit cards in it. The Customer Services account manager immediately blocks all the cards and preparations to issue new cards are already underway. A sigh of relief in Lisbon. Since October 2010, our Customer Services have been continually available: around the clock, seven days a week, including bank holidays. This 24/7 formula makes banking even easier and more convenient and relaxed for comdirect customers. No more need to note down emergency numbers for blocking accounts and neither weekend queries on bank transfers nor calls from distant climes with different time zones pose any problems. Personal service anytime, anywhere. Even emails, an increasingly popular channel of communication for customers, are answered during the night. And this is important as nearly one in ten emails arrives between 10 p.m. and 8 a.m., explains Henning Ratjen, Divisional Manager Customer Services. Which was exactly when we used to be closed. Now we can once again noticeably reduce the time it takes to respond to an email. Moreover, the service level for incoming calls also remained high. Even before the Customer Services business hours were extended, customers regularly awarded top marks for speed, expertise and the friendliness of the team; now exemplary personal accessibility can be added to this list.
Efficiency: not just a question of technology So how can a Customer Services account manager deal with an ever increasing number of enquiries on average and address each customer s question in detail at the same time? The answer is through increased efficiency which we achieve year-on-year through improved technology and ongoing, consistent training. Technical improvements can be complex at times, like the introduction of the higher performance email response management system at the end of 2010, which enables faster responses to customer requests. Sometimes, however, they are amazingly simple and all the more effective such as equipping all Customer Services workstations with a second screen. None of us would want to manage without the second monitor now, comments Andrea Wöhlcke, a Customer Services account manager. All the information can be seen immediately without needing to shift or open windows, usually making it even quicker to find a solution for the customer. Furthermore, we are continually expanding our online functionalities so that customers can carry out their banking transactions as conveniently as possible. In the past year, these included the account switching service: by using a comprehensive address database, customers can now notify payees of their new account details by personalised letter direct from the website. And a fast online function for international transfers has been added, where previously such instructions could only be issued in writing or by telephone. In each case, these features mean that fewer employees in Customer Services, are tied up with such standard processes. Increased efficiency does of course not only require an improved technology, but also the expertise and solution-oriented approach of the staff members involved. We have therefore added a Chamber of Industry and Commerce (IHK) qualification to our five stage internal qualification programme comahead. After a few weeks of preparation and several days of training, including at the Wirtschaftsakademie Schleswig-Holstein (Schleswig-Holstein Academy of Business and Administration), on topics and issues such as conversation techniques and banking questions, Customer Services employees take a written and practical test. They are then entitled to use the Customer Services Financial Services (IHK) certification. Anytime, anywhere: opening an account with comdirect The extended Customer Services business hours are an important step towards making access to our range of products and services as easy as possible for new and existing customers. Another major step is the introduction of FlexIdent, a convenient procedure for the identity verification required by law when opening an account or custody account. Previously, a new customer had to go in person to a branch of the post office to do this. Now customers can have their identity verified within Germany by an express service courier, when and where they want, and can then hand the signed account opening documentation straight to the courier. Both the PostIdent and FlexIdent procedures are completely secure and free of charge. Opening an account or custody account using FlexIdent: it s so easy Even when filling out the account or custody account application, new customers can indicate where they want to have the required identify verification procedure carried out. Whether at home, at work, on holiday anywhere in Germany is possible with FlexIdent. A DHL Express employee comes at the appointed time and verifies the customer s identity using their ID or passport with official registration. Very convenient: And the courier can take the signed documents with him straightaway and forward them directly to comdirect.
20 > Group management report: Key developments Despite a subdued market environment, the comdirect group can look back on a successful financial year in 2010. Through intensified marketing and numerous improvements in products and services, we surpassed the level of organic growth achieved in the previous year. The number of customers increased by almost 150 thousand to reach nearly 2.3m and assets under custody rose by around 20% to over 42bn. Both business lines recorded growth. The main driver in the B2C business line was the current account with satisfaction guarantee, which was actively promoted, while in the B2B business line, additional institutional customers were convinced to use ebase to service their custody account and customer portfolios. At year-end 2010, we managed 1.48m custody accounts, further strengthening our market leading position in the online securities business in Germany, with a rise of 4.4%. The restructuring measures started at ebase in the previous year have essentially already been completed. In the B2B business line, we have realigned the Sales division and reduced surplus capacities in Customer Services. In the B2C business line, the focus on direct bank-type advice models led to the complete withdrawal from local advisory services through the offices of comdirect private finance by mid-2010. In the comdirect group, we now only offer local advice at four locations, where we provide property financing within the scope of Baufinanzierung PLUS building finance advice. With a pre-tax profit of 80.9m, we comfortably achieved our target of 80m set in the middle of the year. Compared with the previous year, the growth in profit amounts to 6.4%. More active securities trading resulted in higher net commission income. Although net interest income declined, the trend in the second half of the year was once again on the rise. Despite intensified marketing, the increase in administrative expenses was only modest, reflecting the strict cost discipline in all areas of the bank. The bank s financial situation and assets, as well as its risk position, remained stable. Our strategy, which is geared to sustainable, earning-oriented growth, led to a large number of new product features and services. Highlights in the B2C business line are the increase in functions for the current account, extension of Customer Services business hours, the innovative identity verification procedure FlexIdent, enhanced savings plan offering and expansion of direct bank-type advisory models with a focus on investment advice and building finance. In the B2B business line, the priority was on linking funds and deposit business via a new architecture for custody accounts and other accounts.
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 21 > Group structure and business activities The comdirect group offers private investors all of the key financial services and products for trading, securities and financial investments as well as payments and financing from under one roof. With our offering in brokerage and banking, as well as investment, building finance and provisioning advisory services, we are the partner for more than 1.5m customers. In addition, there are the 737 thousand end customers of our institutional partners insurance companies, financial service providers, asset managers and investment companies. We offer these customers comprehensive product solutions for financial investments in investment funds and ETFs as well as call money and fixed-term deposit accounts. Our presence in both retail and institutional business enables us to extensively leverage all the opportunities offered by the growing direct banking market in Germany, for the benefit of our customers and our shareholders. Inclusion in the Commerzbank Group comdirect bank is listed in the Prime Standard (Regulated Market) and in terms of market capitalisation, is one of the mid-size joint stock corporations on the SDAX. 80.53% of the shares are held by Commerzbank Inlandsbanken Holding GmbH, a wholly-owned subsidiary of Commerzbank AG. Commerzbank AG provides a range of services for comdirect bank, such as the processing of securities trading transactions, payment transactions and risk management services. In addition, the Treasury department of comdirect bank works closely with Commerzbank and generates interest income mainly from money and capital market transactions with Commerzbank AG or its affiliated companies. comdirect bank AG provides administrative services for Commerz Direktservice GmbH, which is part of the Commerzbank Group. Branch customers of Commerzbank AG use the custody account services of the subsidiary European Bank for Fund Services GmbH (ebase). A detailed overview of the business cooperation arrangements can be found in the group notes on pages 85 to 87. Fields of competence and group legal structure As the parent company of the comdirect group, comdirect bank AG is directly responsible for direct business with private customers (B2C business line). Its subsidiary ebase is in charge of business with institutional partners and their end customers (B2B business line). The interaction between the two business lines helps the comdirect group expand its market leadership in domestic online securities trading as well as gain further market shares in online banking. The range of products and services in the brokerage, banking and advice fields of competence are pooled in the B2C business line. As a result of our focus on direct bank-type advisory models, by mid-2010 we had withdrawn completely from offering local advisory services through the offices of former subsidiary comdirect private finance AG, which was merged into comdirect bank AG in the second quarter. The B2C business line also includes separate assets in the form of five special funds which are part of the Treasury investments. Major locations The registered office of comdirect bank AG is in Quickborn near Hamburg; ebase moved its registered office during the reporting year from Haar to Aschheim (both near Munich). Online business at the comdirect group is carried out primarily via the websites, but also through other access channels such as mobile banking, banking software, and banking apps for the iphone. Since the third quarter of 2010, a banking app for the ipad has also been available in the B2C business line. The bank offers highperforming Customer Services for direct contact with customers by email, telephone, fax or letter. Advisory ser vices as part of Anlageberatung PLUS investment advice services and Vorsorgeberatung PLUS provisioning advice service are provided by telephone. In addition to the advice service by telephone, Baufinanzierung PLUS is also offered at the four locations Berlin, Frankfurt/ Main, Hamburg and Munich. Management and control Management and control of the comdirect group comply with generally accepted high standards. These are summarised in the Corporate Governance statement, including the Declaration of Compliance pursuant to Section 161 of the German Stock Corporation Act (AktG). The Corporate Governance report comprises additional detailed explanations in accordance with Section 3.10 of the German Corporate Governance Code and contains information on our compliance standards as well as the main features of the compensation system for the Board of Managing Directors and the Supervisory Board. The audited compensation report also forms part of the group management report. There were two changes in the Board of Managing Directors in the reporting year. Dr. Thorsten Reitmeyer was appointed the new CEO of comdirect bank AG with effect from 1 December 2010. He succeeds Michael Mandel who moved to Commerzbank AG as divisional board member for Private, Business and Wealth Management Customers.
22 Alexander Boldyreff resigned from the Board of Managing Directors of comdirect bank AG with effect from 1 November 2010. His departments Marketing and Sales, Product Management and Treasury as well as the advisory offering are now under the direction of CEO Dr. Thorsten Reitmeyer and member of the Board of Managing Directors Carsten Strauß. The present allocation of departments/divisions is as follows: Responsibilities of the members of the Board of Managing Directors (as at the end of 2010) Dr. Thorsten Reitmeyer CEO Dr. Christian Diekmann Carsten Strauß In the Supervisory Board, the chairmanship passed from Dr. Achim Kassow to Martin Zielke on 18 November 2010. The resultant changes in the committees of the Supervisory Board are indicated in the report of the Supervisory Board (see pages 9 to 12). Statement of Corporate Governance Business Development Marketing & Sales Product Management & Treasury Corporate Communications Finance, Controlling & Risk Management Internal Audit Legal Services/Compliance B2B: Institutional Business/ebase Customer Services Human Resources & Organisation Process Management Information Technology Investment Advice Building Finance The Statement of Corporate Governance, including the Declaration of Compliance pursuant to section 161 of the German Stock Corporation Act (AktG), is available at www.comdirect.de/ir under Corporate Governance in the Corporate Governance Code section. Key products, services, business processes B2C business line In its brokerage field of competence, comdirect facilitates speedy, secure and cost-effective trading through user-friendly functions and provides a continually expanded and optimised selection of products for medium and long-term investing. We execute buy and sell orders for securities listed on German stock exchanges (spot and futures markets), including futures contracts. Furthermore, we offer access to more than 50 stock exchanges outside Germany (all figures as of year-end 2010 unless otherwise indicated). With comdirect LiveTrading, we additionally operate a highly efficient platform for OTC trading of equities, warrants, certificates, bonds and listed funds. Here, we work together with 27 trading partners. For trading, we offer a range of professional tools and user-friendly order functionalities. comdirect Informer, a customisable instrument providing market and price information, was fundamentally revised in the reporting year. With regard to systematic asset accumulation, investors have access to more than 10,000 funds from over 150 fund companies (as of 31 December 2010) as well as listed index funds (ETF), exchange traded commodities (ETC) and certificates. In the past year, we expanded the selection of securities eligible for savings plans to more than 550. Investors can also invest in selected asset management and lifecycle funds without front-end loads via our AktivSparpläne savings plans. comdirect also acts as a partner to asset managers and other financial service providers, for whom we provide a high-performance internet platform with extensive order functions and maintain their customer custody accounts. The institutional business activities of comdirect bank utilise the expertise of ebase and vice versa. In brokerage, comdirect primarily generates commission income from securities trading and associated services on the one hand and from front-end loads and sales follow-up commission in its funds business on the other. There is also interest income from loans against securities. In the banking field of competence, comdirect offers products for short through to long-term investment as well as daily money transactions. For payment transactions, comdirect offers the comdirect current account with satisfaction guarantee, along with ec/maestro card and VISA card at no cost, as well as numerous service benefits which were further enhanced in the reporting year. For financial investments, customers can use the Tagesgeld PLUS ( call money PLUS ) account and associated money savings plan, fixed-term deposit and time deposit accounts, as well as the currency investment account. comdirect bank also places consumer loans in cooperation with Süd-West-Kreditbank.
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 23 In banking, comdirect generates interest income by reinvesting customer deposits in the money and capital market through the Treasury department. We are establishing our advice field of competence and we cover all of the main customer requirements through our three offerings Anlageberatung PLUS, Baufinanzierung PLUS and Vorsorgeberatung PLUS. Anlageberatung PLUS is based on the systembacked monitoring and analysis of customer portfolios with regard to yields and risks every trading day and the advisory services are remunerated via a fee model. Baufinanzierung PLUS, which is also system-backed, facilitates a comparison of the terms and conditions of 153 building finance partners in order to select the best financing for the customer. Vorsorgeberatung PLUS covers old-age provisioning as well as financial protection for families, income and assets through insurance products. In the advisory fields, comdirect earns commission income from placing building finance and provisioning products as well as fees from investment advice. Commission income is also generated from trades that are executed on the basis of investment recommendations provided as part of the advisory services. B2B business line Through its B2B partners, ebase offers tailored solutions for asset accumulation and investments. End customers can choose from a range of 6,800 funds from 220 fund companies and 188 ETFs from three providers. 5,300 funds and 163 ETFs are eligible for inclusion in savings plans. Investments in call money accounts and, since the start of 2010, fixed-term deposits are also available. The effective online sales partner portal and the new ebase app provide the partners with comprehensive services and offer easy access to portfolio and transaction data. The earnings model of ebase primarily centres on fees for custody account management, which is supplemented by commission from funds business and interest income. Custody account management is flanked by an extensive range of services, which include commission processing and professional data management as well as sales and marketing support for the partners. Asset managers can also use the managed custody account. This product variant provides a range of special functions for modern processing of standardised asset management services with fund portfolios. The OrderDesk custody account offers a multi-investment company solution for the procurement and safekeeping of fund units. Insurance companies use this facility primarily for the custody of cover assets. Special solutions are available for company and fund-backed old-age provisioning. Key sales markets and competitive position Over the past few years, we have continually expanded our position in the direct banking market. We are in competition with other direct banks and online brokers, traditional retail banks as well as B2B fund platforms. With a total of around 2.3m customers and 1.48m managed custody accounts in the B2C and B2B business lines, the comdirect group is the market leader in online securities business in Germany. Furthermore, it is also one of the three leading direct banks with respect to customer numbers. The long-term industry trends are positive: direct banks have gained new customers in brokerage and banking in recent years and continue to offer significant growth potential (see opportunity report on page 62). In the B2B business line, ebase leads the field in Germany in terms of custody assets in investment funds placed by third parties. It is also the partner of first choice in the independent financial advisors (IFA) customer segment. At present, the services provided by ebase are used by 126 sales partner organisations. We believe the customer segments and competitive environment in the B2B business are favourable in the medium to long term (see opportunity report on page 62). The architecture for custody accounts and other accounts was further developed in the reporting year. Through the ebase Depot flex custody account, sales partners can process fund transactions for the investment custody account directly via the linked settlement account. Furthermore this can be combined with a call money or fixed-term deposit account. If required, the custody account and accounts can be configured on a partner-specific basis or seamlessly integrated into the product offering and respective corporate design of the partner as white label version.
24 > Value-driven strategy and management system The comdirect group is a value, growth and income-oriented enterprise. We utilise opportunities arising from the development of the market environment and investor behaviour, and make targeted investments in establishing and expanding our customer relationships and the business model. We control the level of growth expenses on a flexible basis. We are guided here both by the assessment of the respective market opportunities and our demanding targets for return on equity and risk-bearing capacity. Essentially our growth is based on three levers: The first is to continually expand the range of products and services in line with customer requirements and make it as easy as possible for existing and new customers to access our offering. By enhancing product quality and increasing the accessibility of our Customer Services, we are consistently continuing our development as a main bank for modern customers. Secondly, we are raising the already high level of awareness for our comdirect and ebase brands through precisely targeted marketing campaigns. The focus here is on B2C business and at present the current account in particular. Thirdly, our growth is based to a significant extent on attractive terms and conditions. We increase our number of customers and level of product penetration through competitive deposit interest on call money, fixed-term deposit and time deposit accounts, reduced custody account and trading fees as well as lower front-end loads. This growth is supported and promoted through improved efficiency and cost discipline in all divisions of the group, including cost and earnings synergies. We are realising further efficiency and performance advantages by modernising our IT architecture, which is already well-advanced. By pursuing this strategy of profitable growth, the comdirect group aims to expand its market leadership in online securities business in Germany and gain market shares in the banking segment. We intend to increase the number of customers to 3m and assets under custody to 50bn by 2013. Strategic direction of the business lines Strategic milestones in the B2C business line In the B2C business line, we have pooled the key strategic measures in the complus programme, which was presented in February 2009 and covers a five-year period. In 2010, the second year of complus, we achieved main milestones in all areas of complus and initiated new measures. As a result, we now offer investors even more incentives to decide in favour of comdirect bank. Attractive range of products and services. Through new current account functions such as online international transfers, iphone and ipad applications and the convenient FlexIdent identification verification procedure, the range of products and services has been expanded in the banking segment in particular. In 2011, we will now focus more closely on brokerage. By the end of the year, our LiveTrading platform is set to offer limit functions for OTC trading. Furthermore, we are planning to introduce trading in contracts for difference (CFD). Direct and individual contact with specific customer groups. We have further developed our offering during the reporting year, especially for long-term investors and customers with securities saving plans. For example, for customers with higher volumes to invest, the fund universe was increased by more than 500 funds requiring larger minimum investment amounts. Quality-checked investment proposals also support the individual mix of ETFs and other securities in a savings plan. Starting in the second quarter of 2011, a special ETF Informer will be available for use. Modern and effective banking platform. The modernisation of the application and system environment progressed further with the migration of order functions to the new Java architecture and will be completed shortly. Using the new Informer section, customers can already individually customise market and price information. A comprehensive relaunch of the website will follow in 2011. Since October 2010, our Customer Services staff have been personally available around the clock and the further enhancement of staff qualifications and continued technical upgrades enable them to respond even faster to customer requirements. Independent and transparent advisory models. We expanded our range of direct bank-type advisory models in the reporting year with the Vorsorgeberatung PLUS service, and therefore now offer expert and independent advice to customers in the three key advisory fields investment, building finance and provisioning. Strategic milestones in the B2B business line ebase aims to be Germany s leading integrated brokerage and banking platform for institutional partners (B2B direct bank). The overriding objective here is to optimally support the business models of the cooperation partners with the right products and services and thus gain new customers and assets under custody in the target segments. The individual elements of the B2B strategy for 2010 were implemented as planned.
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 25 Stronger focus on sales. Right at the start of the year, ebase amalgamated Product Management, Sales Controlling and Marketing to form one division, thereby creating the organisational prerequisites for more intensive market cultivation in the relevant customer segments. The stronger focus on sales and marketing results in a substantially more active role for ebase as it supports its sales partners in the competition for end customers. Enhanced product range. Major progress has been made in supplementing the custody account services with B2B-type banking solutions. The main measure here was the revision of the architecture for custody accounts and other accounts. Through the ebase Depot flex custody account, in combination with a call money or fixed-term deposit account if required, our partners are better able to keep the funds entrusted to them by customers within their advisory cycle. ebase also acquired two further ETF providers, usefully extending its funds business. To utilise growth opportunities, ebase also commenced the development of additional account and custody account functions. Extended offering of partner-specific services. During the reporting year, ebase was also successful with custody account solutions which are customised for the respective B2B partner either through co-branding or white labelling (see page 43), allowing ebase to support its partners in the sales process. ebase is expanding its services for custody accounts in order to meet the increased service requirements of its partners that also arise from changes in the regulatory framework conditions. Securing a competitive cost position. The measures initiated at the end of 2009 to increase efficiency and improve the cost/income ratio progressed very well. Amongst other things, these measures resulted in a restructuring process that included a reduction in the number of jobs, a process which was carried out in a socially responsible manner and was completed in 2010 thus considerably earlier than planned (see page 51). Financial and risk strategy The strategic financing measures of the comdirect group are described from page 45, while our risk strategies are explained in the risk report starting from page 53. Management Intangible assets of the comdirect group The value-driven management of the comdirect group is based on its fields of competence and intangible assets. In addition to the assets reported in the balance sheet, these intangible assets determine the value of the company and as such form the basis for successful business development and earnings performance. The most important intangible asset is the quality of our customer relationships. By targeting customers through marketing campaigns, our website, Customer Services and investment, building finance and provisioning advisers, we intend to intensify these relationships and increase both customer satisfaction (see page 35) and customer activity. In addition, our institutional partners are serviced by key account managers. The high level of awareness of the comdirect and ebase brands and the values associated with the brands are a key competitive factor in existing and new customer business as well as in the capital market. We therefore strive to continually improve these brand values. Details of the comdirect group s presence in the capital market and its activities in Investor Relations in the reporting year are presented on pages 48 to 50. Operating excellence in our largely automated yet individualised contact approach tailored to the different customer groups is one of the strengths in the B2C business line, which impacts positively on the value of the company. This refers to the acquisition of new customers and the ongoing servicing of customers as well as the efficient execution of campaigns. This presupposes a high level of customer-related knowledge, professional and flexible Customer Services and a high-performing IT system. The management quality, service expertise, process intelligence and innovative power of the bank essentially depend on the expertise of its employees. We enhance our employee s skills through a range of personnel and executive training measures. We promote expertise and create framework conditions for the positive development of teams, are involved in training and continued professional development and offer performance-related and profit-oriented compensation (see page 52). Internal management system To systematically expand our core competencies and intangible assets for the benefit of our shareholders and stakeholders and to achieve our overarching goal of a permanently attractive return on equity, we manage the entire bank on an integrated, holistic basis, taking account of all material risks and opportunities. In this regard, we focus our attention not only on the development of financial performance indicators, but also on non-financial performance indicators, which have an impact on the earnings situation and company value of the bank.
26 The monthly overall bank management reporting shows whether the bank s financial and operating performance indicators are within the target range or whether unexpected variances have occurred. Selected performance indicators are monitored and managed at shorter intervals. The financial situation is illustrated by the return on equity and the cost/income ratio, amongst others. Further important financial performance indicators are the development of net interest and net commission income as well as the profit per customer. With regard to the non-financial performance indicators, we distinguish between customer, market and product-related indicators, as well as efficiency, risk and process-related indicators. Selected indicators are used in external reporting. Customer and market-related indicators, such as trades or the number of different deposit accounts, are largely operating, company-specific leading indicators that have a delayed impact on our financial indicators, and in the event of budget variances, enable us to implement countermeasures early on, for example by adjusting terms and conditions. Sustainable development of the comdirect group Corporate social responsibility decisively guides our day-to-day actions in the comdirect group. This responsibility goes far beyond our operating activities, encompassing community and social aspects as well. Sustainability indicators As part of our overall management of the bank, we pay special attention to certain performance indictors that make it possible to measure the sustainable development of the comdirect group. Due to our business model, the relevant sustainable development key performance indicators (SD-KPI) for the financial services industry, which include corporate customer business and proprietary asset management products, are only applicable to a very limited extent. In brokerage, we support our customers in their investment decisions with a comprehensive range of information and analysis tools. We also make a large share of these tools available to noncustomers as well. Together with the specimen custody account, our central information platform the customisable comdirect Informer recorded an average of more than 90m page impressions per month, corresponding to approx. 50% of all of the page impressions for our website. With the aim of providing securities investors with tips on how to adequately diversify their portfolios, we also provide investment proposals that have been quality-checked by independent organisations. Our FondsDiamanten fund offering a selection of 20 funds with above-average valuations is subject to particularly strict selection criteria. The funds have to score well in the performance-based rating as well as in the Morningstar qualitative rating, if applicable. The qualitative rating measures the quality of the fund management and investment process, amongst other factors, and prefers providers that view their unitholders as partners and put the long-term prospects of success ahead of short-term profits. Furthermore, we use this rating when selecting funds for our fest & fonds offering and, if applicable, for the successful fund of the month format. Selected financial performance indicators Performance indicator Definition business line B2C business line B2B Return on equity before tax Cost/income ratio Net interest income per customer Net commission income per customer Profit per customer 2010 2009 2010 2009 Pre-tax profit/average equity excluding revaluation reserve (in %) 15.8 16.6* 35.4 26.8* Administrative expenses/(net interest income before provisions + net commission income + result from financial investments + other operating income + result from hedge accounting + trading result) (in %) 70.7 68.3* 80.5 83.4* Net interest income after provisions/ number of customers on average for the year (in ) 68 78 0 0 Net commission income/number of customers on average of the year (in ) 87 80 43 37 Pre-tax profit/number of customers on average for the year (in ) 48 56* 8 6* * before restructuring expenses
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 27 Selected operating leading indicators and other non-financial performance indicators Performance indicator Definition 2010 2009 Customer, market and product-related performance indicators (B2C) comdirect current account product penetration Number of current accounts/total number of customers (31.12.) 41.5% 36.8% Tagesgeld PLUS account Number of Tagesgeld PLUS accounts/ product penetration total number of customers (31.12.) 72.5% 66.2% Order activity Number of executed orders/number of custody accounts on average for the year 10.7 10.3 Custody account Number of custody accounts/ product penetration total number of customers (31.12.) 48% 49.6% Multi-product use Proportion of customers with a minimum of two products in relation to total number of customers (31.12.) 53% 48% Customer, market and product-related performance indicators (B2B) ebase account product penetration Number of ebase accounts in relation to the number of end customers custody accounts with supplementary account agreement 13.4% 2.5% Partner-specific configuration Proportion of customised and white label products product penetration in relation to the total number of custody accounts 75.6% 83.4% Fund-based savings plan Number of fund-based savings plan customers product penetration in relation to the total number of custody accounts 16.6% 18.3% Efficiency, risk and process-related performance indicators System availability (B2C) Availability of customer-relevant website functionalities 99.9% 99.9% Service level (B2C) Proportion of incoming telephone calls answered within 30 seconds 83% 83% Utilisation of risk-bearing capacity (comdirect group) Economically required capital/risk cover potential (31.12.) 36.2% 29.1% To promote the long-term asset accumulation by private households that is important for the economy, we offer particularly favourable terms and conditions as well as financial incentives for customers to invest in securities savings plans. One such example is financial security for the younger generation via our JuniorDepot junior custody account. Here we have doubled the starting credit for securities savings to up to 60. At the end of the year, there were 41.8 thousand JuniorDepots accounts, 8.0% more than in the previous year. Mathe.Forscher (maths researchers), Mathematik ohne Grenzen (maths without borders), Mathe-Meister (maths champions) and the nationwide competition for schools Mathe macht das Tor (score a goal with maths), as well as a study entitled Rechnen in Deutschland ( Numeracy in Germany ). Staff from comdirect bank were involved in the Mathe4Life (Maths4Life) corporate volunteering project and went to schools in and around Hamburg to talk about maths and help create a better understanding of the importance of maths in professional life. Through our completely fee-free current account, we offer all private individuals to make payment transactions free of charge, whatever their income. Numeracy Foundation ( Stiftung Rechnen ) Making numbers fun that is the central mission of the Numeracy Foundation, which was founded and initiated by comdirect bank. Established in 2009, the Foundation aims to promote numeracy in Germany. As a central point of contact, the Foundation networks promoters of mathematics and number skills from the worlds of academia, business, politics and society and initiates and supports activities that draw attention to numeracy and help give it a positive image. In 2010, a wide range of initiatives were carried out under the auspices of the Foundation including We pool our social commitment activities, which centre on numeracy and maths education, in the Numeracy Foundation, whereby comdirect bank views itself as a partner of the Foundation. Accordingly, not only did comdirect bank together with Börse Stuttgart AG provide the basic assets for the Foundation, but it also supports expansion of the Foundation s activities by having executive comdirect employees on the Management Board and Board of Trustees. In addition to operating the office, the bank also conducted its own promotional projects and staff members were involved in designing and implementing Foundation projects. comdirect bank won the 2010 International German PR Award (DPRG) in the category of Sustainability Communications/CSR for the Numeracy Foundation.
René Hojas Information? Easy to find. Access? From anywhere. Stable and reliable systems? A matter of course. Together with the IT team, our specialists in web management, such as René Hojas, have tailored comdirect direct banking completely to the needs of the mobile generation. Optimised usability and modern design for desktop PCs, tablets and smartphones.
With a modernised IT infrastructure comdirect is able to offer customers substantially more information, interaction and an intuitive user navigation. This applies to both the website and mobile applications. At the same time, we have also significantly upgraded the security standards for online banking and shopping. More convenient, smoother and even faster permanent improvements in comdirect s system and application environment considerably enhance the ease of use for customers. And even seemingly small changes can have major results. An example, the optimised display of credit and debit entries: a full text search makes it easier for customers to systematically manage their transactions by payee, reason for payment or amount. Example of server capacity: the systems for customers, registered visitors and interested parties are selectively managed, with priority given to customers. Critical situations, such as a rapid rise in the number of orders, are avoided from the outset. And an example related to our IT architecture: after thousands of days of development, the system has now been almost completely switched over to Java technology, and order functionalities and customer data are also included in the new environment. These will be followed in 2011 by payment transactions and securities savings plans, completing the migration and bringing the five-year project to an end. Advantage of the migration: new applications can be integrated into the existing offering more quickly and require less time-consuming maintenance and updating which naturally is performed in the background. The most comprehensive overhaul in 2010 was the relaunch of comdirect Informer after extensive customer tests. The revised Informer section of the website allows every user to practically create their own information platform, thereby gaining a completely new perspective on the bank. All of the tools and overviews, such as the price chart with interactive Features of the new comdirect Informer Automatic updates for prices, charts and news on the customer s personal home page The page layout can be changed using the drag & drop function, for example on the customer s personalised home page or in the model portfolio Interactive charts with price information covering any time period Additional display of disbursements and splits on price charts Display of commodity prices and associated warrants and certificates
price information and the refined securities search, can be customised and filtered in line with the customer s individual requirements. Users can therefore choose the topics and level of detail they want and despite the wealth of information available, do not run the risk of losing the overview. This type of variable configuration is only feasible within a flexible infrastructure, explains Jan Frase, Project Manager IT. Safe and secure with online banking With its capital market based content the Informer is aimed primarily at traders, fund investors and those with securities savings plans, as well as any visitors to our website keen to find out more about stock market movements. Banking customers have also seen a great deal happen on the technical side in 2010. Security: Since April 2010, online purchases by credit card have been password-protected via the Verified by Visa authentification procedure. All that is required is a one-time registration in the customer login section (Persönlicher Bereich) of the website. And using credit cards offline has also been made more secure, as all the cards now have a chip in accordance with the EMV standard. For example, the app can be used to check account balances and for domestic and forward-dated transfers. Another feature is the contact database, which enables the customer store names, account numbers and sort codes for future transfers. In the first quarter of 2011, an ATM search is added to the app and a custody account overview for all banking customers. In the first few weeks there were already more than 40,000 banking app downloads with around one quarter attributable to the ipad, making it one of the three most popular banking applications in the app store. More mobility, more interaction comdirect s website will be comprehensively redesigned by the end of 2011, including adjustments to make the display more compatible with the higher resolution of larger screens. Above all, the website will be more informative and more interactive and will offer customers a better overview. For mobile customers, a web app is being prepared which will enable comdirect quality online banking on all smartphones. Mobile devices: In addition to our established online banking service via mobile.comdirect.de, in September 2010 we launched the comdirect banking app. This made us the first bank in Germany to enable our customers to perform banking transactions via the ipad, and of course the app can also be used for the iphone. The key feature is its multi-bank capability: We know that many customers also have accounts with other banks, says René Hojas, a specialist in web management. Our app allows them to maintain an overview of all their accounts.
28 > Market environment At a glance For the most part, the economic framework conditions were difficult in financial year 2010: As in the previous year, persistently low money market interest rates once again substantially reduced the appeal of financial investments, making growth in the deposit business difficult. At the same time, the interest margins that could be achieved in the current low interest rate environment were severely limited. The high level of indebtedness in some peripheral countries in the eurozone and the sovereign debt and currency crisis it triggered led to distinct nervousness in the bond markets, and was also reflected in the widening of credit and liquidity spreads as well as downgrades on some bonds issued by banks in the countries affected. This limited the investment options available to the Treasury department. The rapid recovery of the global economy fostered an upswing in the equity markets. At the same time, uncertainty regarding the sustainability of the upturn and stability of the financial system resulted in pronounced volatilities at times. The environment for our services in brokerage was consequently more favourable than in the previous year. In contrast, development in long-term financial asset accumulation via investment funds was muted. Economic environment The global economy has quickly recovered following the economic collapse in 2009, with production levels once again on a par with those prior to the financial market crisis. However, there were significant variations in the speed of the recovery: according to an annual survey by the Expert Advisory Board, the rate of growth in the emerging countries was more than three times higher than in the industrialised nations. In addition to the stable economy in the emerging countries, growth was driven by low market interest rates, low inflation rate and an expansive fiscal policy in many national economies. According to the World Bank, the global economy expanded by 3.9% in 2010. Nonetheless, the recovery increasingly lost momentum over the course of the year. On the one hand, this was due to restrictive measures in China and other emerging countries, which were aimed at countering a possible overheating of the economy. On the other hand, problems in the labour and property markets had a surprisingly strong curbing effect on the pace of growth in the United States, and as a result, concerns about the economy have recently increased again. Against this backdrop, the USA continued its expansive monetary and fiscal policy without restriction, including another massive economic stimulus programme as well as the purchase of government bonds by the Federal Reserve Bank (quantitative easing 2). At a global level, this produces new economic threats in the form of inflation risks, devaluation of the US dollar and the formation of a bubble in the emerging countries. Growth in GDP (adjusted for inflation in %) 1.0 0.8 3.6 4.7 4.2 2008 2009 2010 Source: Statistisches Bundesamt 1.8 Germany EU 27 There were also two phases of development in the eurozone. After strong growth in the first half of the year, the sovereign debt crisis in the peripheral countries of the eurozone, and the increasingly restrictive financial policy of the euro countries regarding the clean-up of public budgets notably curbed the pace of growth. Despite these constraints, the gross domestic product of the European Union (EU 27), which shrank by 4.2% in the previous year, rose by 1.8% over the course of the year, although development in the individual eurozone countries further diverged. The German economy proved to be the engine of the economy in the eurozone; although the growth rate increasingly flattened out there too, the economy grew by 3.6% (previous year: 4.7%). On the one hand, Germany benefited from rising exports, which were up 14.2% on the previous year, due in particular to strong demand from the emerging countries, as well as depreciation of the euro. And on the other hand, the domestic economy delivered a significant impetus again for the first time in years. Although the state-subsidised consumption incentives of the previous year no longer applied, private consumption rose year-onyear by 0.9%. The surprisingly robust labour market and low inflation rate of 1.1% had a positive impact here. Adjusted for inflation, private households saw incomes rise by 2.6% as compared with 2009. Despite growing consumption, the savings ratio increased from 11.1% in the previous year to 11.4% of disposable income. The financial assets of private households reached the highest level since the reunification.
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 29 Securities investment The development of the capital market environment is a material factor influencing the business performance and earnings situation of the comdirect group. In the B2C business line, the level of commission income in brokerage is mainly affected by trading activity on the stock markets and OTC trading, which in turn is partly dependent on price movements. With regard to long-term securities investments and investment and provisioning advice, the general trends in asset accumulation for private households are of particular importance. In the B2B business line, the number of custody accounts and the portfolio volume is also largely determined by the investment behaviour of the end customers serviced by the institutional partners. The equity markets oscillated between pessimism and confidence. After a weak start, the German leading index, the DAX, made strong gains over the year and at 6,914 points at the end of the year, was up 16.1% on the close of 2009 (5,957 points). While business figures and leading economic indicators primarily sent out buy signals, the sovereign debt crisis and euro turbulence led to uncertainty among investors and pronounced volatility in the equity markets in the second quarter, resulting in a considerable revival of trading activity. However in the remaining quarters, the DAX volatility index was below the previous year s range. In 2010, the number of orders in the German spot market (XETRA and Frankfurt) was up 11.5% on the previous year. In terms of value, at 12.7% the increase in the trading volume was disproportionately high due to the rise in prices. Shares gained 16.1%, listed index funds (exchange traded funds, ETFs) 18.7% and commodities index contracts (exchange traded commodities, ETCs) 47.7%. Number of orders Deutsche Börse* (in million) 69.7 226.0 48.0 167.3 2008 2009 2010 * XETRA and Frankfurt Stock Exchange 50.6 189.4 FFM XETRA Source: Deutsche Börse AG Investors also traded more actively again in the futures markets. On the Stuttgart (Euwax) and Frankfurt (Scoach) stock exchanges, stock exchange turnover rose by 8.1% overall. There was a slight increase in investment certificates (4.1%), while leveraged products saw strong growth (12.9%). Despite the upside opportunities in the equity markets, fund investors once again held back in 2010 when it came to promising investments. Although at 22.7bn, the sales statistics from the BVI (Bundesverband Investment und Asset Management) up to and including November 2010 showed considerably higher net investments in securities funds (including open-ended property funds) than the previous year ( 2.8bn), but this was primarily attributed to a less pronounced outflow of funds from money market funds and a revival of demand for low-risk fixed-income funds and mixed funds. In contrast, at 8.8bn, net inflows from equity funds remained notably behind the previous year s figure ( 13.2bn). The volume of equity funds increased considerably as funds performed well; mixed funds also benefited from the rise in prices. According to the Deutsches Aktieninstitut, the number of shareholders and unitholders fell in 2010 to 8.2m (second half of 2009: 8.8m). The number of investors investing directly in equities declined by 0.2m to 3.4m, and the number of fund investors dropped by 0.6m to 6.0m. Investments, financing and provisioning In banking, the terms and conditions in the deposit and lending business as well as the interest margin were primarily affected by the movements in the money market and capital market interest rates and spreads in addition to the terms and conditions of competitors. Other important influencing factors for Treasury are changes in the ratings of banks and companies and their bond issues. The banking environment was again dominated in financial year 2010 by the expansive monetary and liquidity policy of the European Central Bank (ECB). The key lending rate for the eurozone has now remained unchanged at an historical low of 1.0% since May 2009. Within the scope of main refinancing operations alone, the ECB provided liquidity with a total volume of approximately 7,000bn at this key lending rate. As a result of the virtually unlimited refinancing available via central bank funds, the three-month EURIBOR persisted at a low level,staying at just 0.81% (2009: 1.23%) on average for the year. Nevertheless, the rise in the interest rate in the fourth quarter to end the year at 1.01% indicates that the ECB has already started its exit from full allocation and market players are expecting a moderate shortage of liquidity.
30 In the bond markets, the yield curve was still comparatively flat and the earnings potential from traditional maturity transformation was limited to short lifetimes. The sovereign debt crisis in some eurozone countries caused credit spreads to widen in the first half of the year along with corresponding price decreases on unsecured bank debt securities, which were particularly pronounced at banks in the countries affected. The situation initially eased as a result of the European Stability and Growth Pact (SGP) agreed in May 2010 and subsequent consolidation efforts on the part of the eurozone countries. In addition, the ECB purchased government bonds issued by Greece and other highly indebted countries in the eurozone. Despite this rescue package, investors see considerable risks for the future development of the eurozone and consequently, spreads on government bonds and bank debt securities widened again in the second half of the year. The predominantly positive results of the stress tests at 91 European banks led in the short term to a tightening of credit spreads, but the effect did not last. The demand, fixed-term and savings deposits of private individuals in Germany increased by 3.6% over the course of the year, coming in at 1,520.1bn at the end of November 2010 (end 2009: 1,467.3bn). Through the terms and conditions they offered, banks primarily steered funds into demand deposits. The volume of loans to private households remained approximately on a par with the previous year. Consumer loans increased slightly, while loans for residential property construction were essentially unchanged. Nevertheless, the market conditions for our Baufinanzierung PLUS brightened somewhat over the course of the year. comdirect s representative Building Finance Sentiment Index, which is calculated bimonthly in conjunction with opinion research institute Forsa, stood at 106.8 points in January 2011 (previous year: 106.0 points). The index condenses the subjective attitude of Germans with regard to their own home and their respective financing ability into an indicator. A value greater than 100 indicates a trend that more people are prepared to take out building finance loans. Although one in two people in Germany believe that it is a favourable time to purchase property including because of the historically low interest rates supply cannot keep pace with demand, especially in the metropolitan regions. At the same time, the need for advice regarding building finance is great. Our surveys show that most potential borrowers are not aware of the different types of mortgages, important contract matters or the use of state subsidies. Provisioning products continued to play a major role in financial asset accumulation for private households. During the reporting period, preliminary figures estimate that more than 1m new Riester policies were taken out in Germany. Overall, some 14m Germans are already using the Riester pension subsidy. At 10.2m (as of August 2010), almost three-quarters of the subsidised policies were attributable to insurance policies (end of 2010: 9.80m), while at 2.81m, investment fund policies accounted for around one-fifth (previous year: 2.63m); according to BVI figures, the total value of Riester fund accounts increased during the year by over 50%, to 7.4bn. Bank savings contracts and private home pensions (Wohn-Riester) also recorded an increase. Studies show that 81% of Germans have taken out, or are planning to take out, at least one funded provisioning product for old-age provisioning. More than one-third of all life assurance policies are already attributed to Riester products. Industry trend The long-term trends continued in 2010: the number of consumers using online banking and brokerage increased to around 30m. European key lending rate and Euribor 2008 2010 (in %) 4.67 4.00 2008 2009 2010 1.00 1.00 EURIBOR 1) ECB interest rate 2) Sources: Deutsche Bundesbank, EURIBOR FBE 1) Three-month money 2) For main financing transactions
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 31 Building Finance Sentiment Index (January 2010 January 2011) (in points) 106.0 102.9 108.8 108.4 104.6 108.5 Jan March May July Sept Nov 106.8 Around 10% of annual financial asset accumulation transactions of private households in financial year 2010 were already executed online. Interest in online banking is very strong the younger generations in particular. In our opinion, this development is driven by the growing number of internet users, higher security standards throughout the industry and greater online convenience. According to a survey by the Study Group Online Research (Arbeitsgemeinschaft Online Forschung AGOF), 72% of Germans were already online in 2010 (German-speaking residential population over 14 years old, previous year: 67%), equating to 50.73m people. 95.5% of internet users had broadband access(previous year: 71%). The acceptance of direct banking models has continued to increase amongst online banking users. Studies show that the number of direct bank users has almost tripled since 2000, to more than 14.5m. As before, the greatest growth potential in brokerage, banking and advice lies with branch bank customers. The competitive environment for transaction and service banks continued to be dominated by a phase of change and consolidation. Our estimates show that the number of active intermediaries declined once again. Many financial service providers are facing the challenge of reviewing their business models and aligning them with new regulatory requirements and changes in investor behaviour. Measures include expanding the product spectrum and increasing efficiency by using cheaper custody account solutions and services. With regard to B2B service providers, this is leading to a differentiation in business models, with pure settlement specialists on one hand and integrated brokerage and banking platforms with full-bank status such as ebase on the other. Jan Regulatory environment With our range of products and services, we are active in tightly regulated markets. The Federal Financial Supervisory Authority (BaFin) and Deutsche Bundesbank are presently responsible for banking supervision in Germany. The core issues under supervisory regulations comprise the solvency, liquidity and lending activities of banks. In our advice business, we are also operating in market segments governed by dense regulation. Implementing new legal and regulatory requirements involves additional cost, for example for the extended documentation requirements for advisory services. The financial crisis has put the protection of investors at the forefront of political attention. In financial year 2010, this resulted in numerous regulatory requirements for the financial services industry. Since the start of 2010, detailed records of all investment advice discussions have to be given to private investors before concluding a transaction. If these records are missing or incomplete, the customer has the right to cancel within one week. The burden of proof lies with the advising investment service provider. Furthermore, at the beginning of the year, the special statute of limitations on claims for compensation due to misselling was removed. The basis is the Act to Reform Legal Relationships for Bonds Constituting Part of a Uniform Issue and to Improve the Enforceability of Investors Claims Based on Misselling (Gesetz zur Neuregelung der Rechtsverhältnisse bei Schuldverschreibungen aus Gesamtemissionen und zur verbesserten Durchsetzbarkeit von Ansprüchen von Anlegern aus Falschberatung), which came into force on 4 August 2009. Through our Anlageberatung PLUS, we complied with these additional requirements at an early stage. Mention should also be made of the Regulations Implementing the Consumer Credit Directive, which took effect on 11 June 2010. The directive contains regulations on credit and loan advertising and stipulates standardised information on the main components of a loan agreement. The comdirect group promptly implemented the rules. The general terms and conditions of business now also include terms and conditions for consumer loans and an interest rate adjustment clause. In 2010, the federal government proposed a law to the Financial Committee of the Bundestag regarding the restructuring and orderly winding-up of financial institutions, the establishment of a restructuring fund for financial institutions and an extension of the statute of limitations for the liability of executive bodies (Restructuring Act). The draft was approved by the Bundesrat at its session on 26 November 2010. Much of the act came into force at the end of 2010/beginning of 2011.
32 The act is aimed in particular at ensuring the functioning and stability of the financial system. It provides for instruments that enable the orderly restructuring or winding-down of those financial institutions facing difficulties without adversely affecting the financial market. The funds potentially required for this are to be primarily provided by a restructuring fund to be financed by the banking industry. The bank levy for the restructuring fund will be governed by a regulation issued by the German Federal Ministry of Finance. The level of contribution is based on the balance sheet liabilities reported in the most recent annual financial statements less liabilities to customers and equity as well as the forward transactions shown in the notes to the accounts. The contributions levied in this way represent a considerable burden for parts of the banking industry. As a result of its balance sheet structure, the additional expenses for the comdirect group in 2011 will be extremely moderate. The amended regulatory requirements for risk management especially the revised Banking Directive and Capital Requirements Directive (CRD II), the amended minimum requirements for risk management (MaRisk) and the planned regulations under Basel III are outlined in the risk report starting on page 53. Furthermore, the Corporate Governance Report 2010 details the new minimum requirements for compliance as well as preparations in respect of current draft legislation (see page 14).
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 33 > Business performance and earnings situation at the comdirect group Overall assessment of economic situation The comdirect group propelled its organic growth in financial year 2010 and increased its pre-tax profit as compared with the previous year. Given the largely difficult market environment, we are very pleased with this development. Number of customers of comdirect group as of 31.12. (in thousand) Total assets under custody of comdirect group as of 31.12. (in billion) 10.5 20.5 9.1 26.5 10.3 32.2 730 700 737 2008 2009 2010 Deposit volume Portfolio volume 1,349 1,451 1,559 2008 2009 2010 Customers B2B Customers B2C The overall risk of the comdirect group has risen slightly, partly as a result of the moderate increase in risk assets and pronounced market volatilities, but the limit utilisation level was consistently non-critical. comdirect therefore has an adequate risk buffer, including in the current market environment. Furthermore, we are convinced that the strategic measures implemented in 2010 have improved our growth prospects and strengthened our earnings power. These measures relate primarily to the successful restructuring and strategic realignment of ebase, which has already produced presentable results in the current year, the smooth dismantling of former subsidiary comdirect private finance, the near complete modernisation of the IT infrastructure as well as the expansion of our range of products and services. Despite increased marketing expenses, pre-tax profit is higher than in the previous year. The improved net commission income over the course of the year and the only moderate decline in net interest income in conjunction with an increasing net interest result in the second half of the year demonstrate the strengths of the combination of banking, brokerage and advice and of the B2C and B2B business. All in all, the development of the financial performance indicators and operating indictors has largely confirmed our expectations. As planned, we were able to increase the number of customers and level of customer activity (multi-product use). Pre-tax profit marginally surpassed the target value of 80m set in the middle of the year. The development in net interest income was slightly below our expectations; we had assumed that market interest rates would rise more quickly, but against the backdrop of the sovereign debt crisis in the eurozone, the ECB was unable to implement its announced plans to withdraw surplus liquidity from the financial system to the planned extent. In contrast, development in net commission income was positive, particularly as a result of the higher number of orders as compared to the previous year and the pleasing growth in the fund volume. Administrative expenses were slightly on a par with the original forecast; as a result of improved long-term market prospects, we invested more strongly in growth again, especially in the fourth quarter.
34 Business performance After gaining 71.7 thousand new customers in net terms through organic growth in financial year 2009, the net increase in the number of customers amounted to 145.5 thousand in the reporting year. Decisive factors here were on the one hand, accelerated growth in the B2C business line during the year due to intensified marketing and attractive terms and conditions for new customers and on the other, the acquisition of a significant number of custody accounts in the B2B business line. At year-end 2010, the comdirect group had a total of 2,296.1 thousand customers in the two business lines, corresponding to a 6.8% increase. The 19.6% increase in assets under custody, to 42.54bn (end 2009: 35.57bn), is primarily related to the increase in the custody account volume, which was attributed to both net fund inflows and price effects. Assets under custody rose by 21.7% overall, to 32.20bn (previous year: 26.46bn). The number of custody accounts climbed by 63.0 thousand, or 4.4%, to 1.48m (previous year: 1.42m). The deposit volume, which is primarily attributable to the B2C business line, recorded an increase of 13.5%, to 10.34bn (previous year: 9.11bn). Marketing, brand awareness and reach Once again we supported growth on the product and customer side through extensive marketing campaigns, particularly in the second half of the year. The focus here was on marketing for our current account with satisfaction guarantee. A marketing offensive was launched in September accordingly, comprising a TV spot, city light posters in selected major cities in Germany, direct mail campaigns and an intensified online advertising. Existing customers were primarily addressed via our website and mailing campaigns. In addition, we strengthened our keyword advertising on internet search engines. We also raised awareness of our offering in brokerage and advice through our website in particular, through our compass customer magazine, which is now available as an epaper for the ipad, and through events such as the Invest investor trade fair as well as active press relations. Our publications related to the Brokerage Index calculated since May 2010 and the Building Finance Sentiment Index launched in the previous year both attracted widespread media interest. This is also true of our comparison of the main property centres Berlin, Frankfurt/Main, Hamburg and Munich and other representative surveys such as the Customer Motives survey published every year. comdirect s website again played a large part in the bank s high level of brand awareness. With more than 181m (previous year: more than 175m) page impressions on a monthly average, it was once again one of Germany s most frequently visited financial websites in financial year 2010. Overall, awareness of the comdirect brand improved slightly over the course of the year 2010. There was a considerable rise in unaided brand awareness and brand likeability. We were able to strengthen our position overall as the second strongest brand amongst the direct banks. Target/actual comparison of selected key performance indicators in financial year 2010 2009 Target 2010 Actual 2010 Net interest income before provisions million 108.7 Stable 102.1 Net commission income million 148.8 Stable 172.8 Administrative expenses million 198.9 Stable 210.0 Pre-tax result million 76.0 Slight increase 80.9 Deposit volume million 31.12. 9,110 Slight increase 10,338 Number of customers B2C 31.12. 1,450,720 Increasing 1,559,021 Multi-product use B2C % 31.12. 48.0 Increasing 53.2 Number of employees 31.12. 1,155 Stable 1,120
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 35 ebase has actively marketed its strengthened deposit business in particular. One highlight here is the Konto 1-2-3 ( Account 1-2-3 ) campaign through which end customers could secure interest of 1% p. a. on call money accounts and 2% p. a. on three-month fixedterm deposits (in each case on investments up to 50 thousand) as well as 3% p. a. on six-month fixed-term deposits (on investments up to 10 thousand). At a roadshow held in five cities, sales partners were informed of the expanded range of products and services from ebase as well as the attractive terms and conditions. Other key topics covered were the product solutions offered by ebase for company pensions as well as expansion of the ETF offering. Furthermore, following the realignment in marketing and sales, ebase gave a presentation at the Funds Congress in Mannheim, Germany, in January 2010. Customer satisfaction and performance comparisons The customer satisfaction and loyalty values in the B2C business line, which are calculated once a year by an independent market research organisation, were essentially on a par with the high level of the previous year. 97% of customers are happy with comdirect bank, with as many as 70% very or completely happy. Willingness to cancel dropped again and four out of five customers would definitely or probably recommend the bank to others. Also pleasing: around 90% of customers trust comdirect bank and view it as a reliable partner. As in the previous year, customer loyalty was particularly strong in the area of daily payment transactions. For many customers, their relationship with comdirect bank offers specific advantages compared with other institutions. Plus points cited in this regard include fast and reliable order processing via the internet, extensive and intuitive information offering on the website, as well as fast response time by Customer Services, and the bank s good image. Representative surveys and performance comparisons in financial year 2010 also affirmed comdirect bank s strong positioning amongst the competition. comdirect emerged the overall winner in a comparison of the eleven most important direct banks conducted by the Deutsches Institut für Servicequalität (German Institute for Service Quality) in June 2010. The comparison examined terms and conditions, the quality of Customer Services, websites and security standards. The Institute also gave us top marks for the best Customer Services amongst the direct banks surveyed. In February 2010, the Institut für Management- und Wirtschaftsforschung (Institute for Management and Economic Research) named us the most trustworthy direct bank in a comparison of 19 financial institutions. In this year s Brokerwahl awards (brokerwahl.de), we successfully defended our Online Broker of the Year title and were honoured as best Fund Broker for the fifth time in a row. The success was rounded off by a second place ranking for Certificate Broker of the year and winning second place in the ETF Broker category, which was awarded for the first time. In a comparison test conducted by investment magazine Focus Money in the third quarter, comdirect was named Beste ETF-Sparbank ( Best ETF Savings Bank ) and ebase s ETF savings plan offering won an award for the widest choice and greatest flexibility. Furthermore, according to Börse Online, we have the best information offering amongst all the online brokers. We also scored well in terms of order processing, accessibility, customer focus and product range. The bank also won awards for its advisory offering. In banking, our current account with satisfaction guarantee received extremely good ratings in three tests. In July 2010, it came in first in a comparison of 73 current accounts conducted by the independent German consumer organisation Stiftung Warentest. This followed the assessment ranking of very good already awarded by consumer websites vergleich.de and getestet.de respectively. Several awards confirm the high quality of our new advisory models. For the third time in a row, we came in first in a comparison test of direct building finance placed by banks, this time conducted by German news channel n-tv. In addition, we ranked first out of 17 providers for our terms and conditions for immediate financing (Sofortfinanzierung). An equally great success was moving straight into third place in the building finance intermediary (for 90% purchase price financing) category in the Bester Baufinanzierer 2009 award bestowed at the beginning of the year by Frankfurt-based FMH-Finanzberatung. The award is based on a full-year evaluation of the interest rates of 74 banks and therefore recognises consistently outstanding services and terms and conditions. Anlageberatung PLUS garnered second place in the Best Process Award presented for the first time by the geldinstitute and versicherungsbetriebe magazines in conjunction with the Frankfurt School of Finance & Management. The award honoured especially well-designed and efficient business processes in the financial sector. Earnings situation Pre-tax profit totalled 80.9m and surpassed the previous year s figure by 6.4%. The figure for 2009 included restructuring expenses of 8.9m for measures at ebase and comdirect private finance. The operating result (excluding restructuring expenses) fell slightly. This was primarily due to the unattractive situation in the money and bond markets; net interest income failed to match the previous year s figure and the result from financial investments,
36 which was essentially down by half, reflects our restraint with regard to selling securities. In contrast, net commission income rose so that at 291.2m, total income was up 3.0% on the previous year ( 282.6m). These were countered by higher administrative expenses arising from intensified marketing measures in the fourth quarter. The cost/income ratio based on the operating result increased by 1.7 percentage points, to 72.1%. The return on equity amounted to 16.8% (previous year: 17.6%). The comdirect group has therefore demonstrated its earnings power under persistently difficult market conditions. At 26.3%, the tax rate increased slightly as compared with the previous year (25.5%). There was a slightly disproportionately low rise of 5.3% in consolidated net income, to 59.6m (previous year: 56.6m). This yields an earnings per share of 0.42 (previous year: 0.40). Pre-tax profit of comdirect group (in million) Net interest income and provisions At 102.1m, net interest income before provisions failed to match the previous year s level ( 108.7m). The decline of 6.1% is due in particular to lower money market interest rates and the fall in bond yields. However, the trend reversed during the course of the year: the drop of 22.6% in the first half of the year, caused in part by money market rates that were even higher during the same period in 2009, was followed by a 14.4% rise in net interest income in the second half of the year. This primarily reflected the adjustment of terms and conditions for the Tagesgeld PLUS account during the year. Other margin effects stem from the slight increase in the money market interest rate in the second half of the year. Volume effects generated by the sustained success of the current and Tagesgeld PLUS accounts also had an impact here. Net interest income before provisions (in million) 163.4 82.8 76.0 80.9 108.7 102.1 2008 2009 2010 2008 2009 2010 Proposal for appropriation of profits The Board of Managing Directors and the Supervisory Board will propose to the annual general meeting in Hamburg on 12 May 2011 that the distributable profit of comdirect bank AG be used for a dividend of 0.42 per share (previous year: 0.41). Earnings per share (in ) 0.43 0.40 0.42 Interest income decreased by 20.5%, to 211.3m (previous year: 265.9m). In particular, interest income from lending and money market transactions declined, coming in at 96.7m this year as compared with 132.6m in the previous year. This corresponded to 45.8% (previous year: 49.9%) of interest income. At 113.5m, less income was also generated by fixed-income securities and variable yield securities than in the previous year ( 131.4m), although the decline was more moderate. At 109.2m, interest expenses were considerably down on the previous year ( 157.2m). This essentially reflects the lower interest rates paid on call money deposits on average during the year and more than offset the opposite effect from campaigns such as the interest rate campaign in the fourth quarter of the reporting year in particular. Through this special offer, 30 thousand new customers were able to secure themselves an interest rate of 3.5% p. a. on investments up to 5 thousand for a limited period of six months; the quota for this offer was exhausted at the end of the year. 2008 2009 2010
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 37 Provisions for possible loan losses were once again very low at 0.3m (previous year: 1.3m). The previous year s positive figure resulted from the reversal of risk provisioning components relating to loans against securities. In the current year, the reversal of some portfolio loan loss provisions was offset by allocations to provisions of around the same magnitude: both resulted from improvements in parameter estimates for the lending business. As in the previous year, no significant specific loan loss provisions were required. After provisions, net interest income stood at 101.8m (previous year: 110.0m). Net commission income (in million) 177.0 148.8 172.8 Result from financial investments The result from financial investments totalled 9.9m and was thus down 52.4% on the previous year ( 20.9m). Apart from the first quarter when we sold a considerable volume of selected bank bonds and other bonds, we have largely refrained from any transactions. The previous year s figure included impairments on securities totalling 5.9m while impairments in the reporting year only amounted to 0.4m. Trading result No trading result is reported for financial year 2010, as ownaccount trading was not carried out. The previous year s figure ( 0.8m) relates to the interest book management of deposit positions using interest rate swaps. 2008 2009 2010 At 6.7m, other commission exceeded the figure for 2009 ( 4.2m) by 60.9%. This was mainly attributable to the major improvement in results from Baufinanzierung PLUS, which moved into profit as forecast, as well as an upturn in the placement of consumer loans. Net commission and net interest income on a quarterly comparison 2010 (in million) 38.8 45.3 40.1 48.6 Result from hedge accounting In May 2010, we hedged a debt security in the Treasury portfolio against a loss in value using an interest rate swap with a nominal value of 20m. The valuation effects from this effective fair value hedge produced a virtually balanced result: the result from hedge accounting amounted to 22 thousand. There were no hedges in the previous year. 29.3 26.2 24.0 22.6 Q1 Q2 Q3 Q4 Net commission income Net interest income before provisions Net commission income At 172.8m, net commission income was up 16.1% on the previous year ( 148.8m). This was primarily due to the rise in sales follow-up commission and front-end loads in the funds business. In particular, this was attributed to the higher funds assets in both business lines. In addition, the increase reflected the larger number of orders executed in the B2C business line, which led to a rise in net commission income from securities business by 13.5%, to 158.1m (previous year: 139.3m). To a lesser extent the increased number of fund trades had an impact. In contrast, custody account fees did not quite match the previous year s figure. Net commission income from payment transactions climbed by 49.8%, to 8.0m (previous year: 5.3m). Due to the substantially higher number of current accounts, the amount of fees and credit card income relating to these accounts has also risen. Other operating result Other operating result totalled 6.4m and was therefore considerably up on the previous year s figure ( 3.4m). Other operating income amounted to 14.2m (previous year: 20.2m). The decrease primarily reflected the fact that virtually no more income was generated from passing on costs to the independent financial advisers of comdirect private finance. Furthermore, the reversal of provisions and accruals resulted in slightly lower income than in the previous year. This included the reversal of a provision for contingent losses in the amount of 1.0m, which was recognised in 2004 in connection with the sale of comdirect ltd comdirect bank s former subsidiary in England. 1.1m of the restructuring provisions recognised in the previous year were written back to income. This was due in particular to the successful negotiations on re-letting the office space previously occupied by the former comdirect private finance.
38 Moreover, the comparative figure for 2009 included a refund of special contributions that ebase had paid to the Entschädigungseinrichtung der Wertpapierhandelsunternehmen (EdW German Compensatory Fund of Securities Trading Companies). Overall, as compared to 2009, less income was generated by administrative services provided by comdirect bank AG and ebase GmbH for other companies in the Commerzbank Group, including Commerz Direktservice GmbH, which acts as a service centre for the private and business customers of Commerzbank AG. Other operating expenses were kept to 7.8m. The figure for 2009 ( 16.8m) included a provision for non-income related taxes from previous years. Furthermore, valuation allowances for adviser balances amounted to 1.3m in the previous year, while the figure in the reporting year was considerably lower. As a result of the higher marketing expenses in the second half of 2010 in particular, other administrative expenses rose by 7.5%, to 133.5m (previous year: 124.2m). Settlement costs in the securities business also increased due to the higher number of trades. In contrast, there was a further reduction in communications and consulting expenses. Despite the slightly lower number of employees, personnel expenses, which totalled 62.6m, were 0.4% higher as compared to the previous year ( 62.3m). The minor increase was mainly due to valuation adjustments in the pension commitments and the Long Term Incentive Program. Structure of other administrative expenses (in million) Administrative expenses Following the substantial decrease of 44m in the previous year, administrative expenses rose again slightly: increasing year-onyear by 11.1m, or 5.6%, to 210.0m (previous year: 198.9m). In order to extensively leverage growth opportunities in brokerage, banking and advice, we significantly stepped up the advertising for our products again, especially in the fourth quarter, and increased the marketing budget accordingly. Through this, we have also adhered to our policy of adjusting the budget in line with market circumstances and managing it flexibly according to our earnings performance. 38.5 30.3 14.0 8.8 80.2 38.6 25.4 11.7 7.0 41.4 2008 2009 2010 38.4 30.3 7.3 4.4 53.0 Sundry administrative expenses External services Consulting Communication Marketing Administrative expenses (in million) 12.1 171.8 12.4 124.2 58.8 62.3 62.6 2008 2009 2010 14.1 133.4 Depreciation Other administrative expenses Personnel expenses Depreciation was up on the previous year ( 12.4m) by 13.6%, to 14.1m. Of this amount, 9.4m was attributable to intangible assets as compared with 7.7m in financial year 2009. The higher figure essentially results from the commissioning of internally generated components in connection with the further development of the IT infrastructure. The customer relationships acquired from American Express Bank GmbH in 2006 were written down as planned. Depreciation of 4.7m related to office furniture and equipment (previous year: 4.6m) (see note (33) on pages 89 to 90).
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 39 > B2C business line Business development in brokerage Securities trading Overall, our customers were more active in securities trading in financial year 2010 than in the previous year. The number of orders executed increased by 6.9% to 7.82 million (previous year: 7.32 million). The figure for the first half of the year substantially exceeded the comparative figure for 2009, which was adversely affected by the financial market crisis and recession. Opportunistic investors used the strong price fluctuations for their investments, particularly in the second quarter. In the second half of the year, the year-on-year increase was lower despite the price rally on the stock markets. As the comdirect Brokerage Index, which is calculated on a monthly basis, indicates, traders were on the buy-side with regard to equities in particular. Demand was also stronger for funds (excluding savings plans), but was still significantly below the longstanding average for 2005 to 2009. The propensity to invest in certificates and warrants was largely stable. With respect to trades in the different types of securities, there were only minor variances in equities and warrants. Certificates lapsed somewhat, while funds gained ground. As regards funds, a greater share was attributable to ETFs than in the previous year. Executed orders B2C (in million) 9.23 7.32 7.82 35,000 leverage and investment products from three renowned companies at extraordinarily favourable terms and conditions. The eleven no-fee campaigns also had a positive impact; during these campaigns, the order fee is paid in full by the product providers. The number of trading partners in LiveTrading increased to 27. Trades by type of securities (in %) 2010 2009 Equities* 32.0 32.4 Warrants 6.8 7.1 Certificates* 25.6 27.2 Funds including ETFs* 7.7 5.7 Securities savings plans 25.6 25.1 Bonds and other 2.3 2.4 * excluding securities savings plans Portfolio volume Customer assets rose sharply in the reporting year and at the yearend totalled 16.11bn, an increase of 22.5% as compared with the end of 2009 ( 13.16bn). Around half of the increase was due to net investments by our customers in a generally friendlier stock market environment. We also triggered significant inflows among existing customers with our two custody account transfer campaigns carried out in the spring and autumn of 2010, which paid a bonus on the fund volume transferred. New customers contributed to the increase in portfolio volume, to a lesser extent. In addition to the net fund inflows for existing and new customers which totalled around 1.5bn, price effects accounted for a similar amount. These related to the second half of the year in particular, while the first six months tended to be dominated by more of a sideways movement. Portfolio volume B2C as of 31.12. (in billion) 2008 2009 2010 16.11 13.16 The substantial expansion of the securities savings plan offering in the reporting year was also reflected in the trading figures. Around 6% of savings plan trades already related to ETFs. The AktivSparplan savings plan launched in the previous year was also popular with investors. As in the previous year, asset management funds were especially in demand. 9.88 2008 2009 2010 37% (previous year: 38%) of trades were executed on our Live- Trading platform for OTC trading. This stable development was due primarily to the large-scale flat-fee campaign in the second half of the year during which investors were able to trade in more than
40 Custody accounts B2C as of 31.12. (in thousand) 697.8 719.2 748.2 Deposit volume B2C as of 31.12. (in billion) 10.47 9.08 10.21 2008 2009 2010 2008 2009 2010 The portfolio volume is attributable to 748.2 thousand (previous year: 719.2 thousand) custody accounts. The rise in the number of custody accounts of 4.0% is predominantly due to cross-selling effects related to the current account and Tagesgeld PLUS account. Business development in banking Deposit business Despite the persistently unfavourable interest rate environment, the deposit volume rose by 12.4% to 10.21bn (end of 2009: 9.08bn). We achieved stronger growth through attractive terms and conditions for our Tagesgeld PLUS account: for a period of six months (March to August), we offered an interest rate of 2.1% p. a. on investments up to 5,000. There was also an interest rate campaign in the fourth quarter, through which new customers could secure a time-limited interest rate of 3.5% p. a., also limited to 5,000. At the year-end, 63% of the deposit volume (2009: 61%) was attributable to Tagesgeld PLUS accounts, which numbered 1,131.0 thousand and therefore surpassed the one million threshold for the first time (end of 2009: 960.9 thousand accounts). The main reason for the rise in the number of accounts was the actively marketed product combination with the current account. The deposit volume in fixed-term deposit accounts (terms of 1-5 months) was down by 30%, while medium to long-term investments in time deposit accounts were on a par with the previous year. The ten-year time deposit account launched in the fourth quarter of 2009, which offers a high interest rate of 3.75% (as of 31 December 2010), therefore recorded pleasing inflows. The volume in currency investment accounts rose sharply, with investments in US dollars predominating. Our current account with satisfaction guarantee convinced a further 113.1 thousand customers over the course of the year 2010 more new customers than in the previous year (108.8 thousand). The number of accounts rose from 533.9 thousand to 647.0 thousand. Growth in the second half of the year was disproportional, reflecting the success of our intensified marketing measures. At the same time, there was a notable increase in deposits in current accounts. It is particularly pleasing that virtually no customer took advantage of the option to close the account after a year of active use and receive a bonus of 50 in return. In fact, the rate of cancellations was down on the comparative figure for 2009 as a result of high customer satisfaction levels (see page 35) and the further enhanced features of the current account. Number of Tagesgeld PLUS accounts as of 31.12. (in thousand) 814.5 960.9 1,131.0 2008 2009 2010 As a result of disproportionately strong growth in the current account and Tagesegeld PLUS account, the structure by remaining lifetimes of customer deposits has shifted even more towards deposits due on demand and unlimited in time. These accounted for 91.6% (previous year: 89.7%) of deposits, while the importance of fixed-term deposits with maturities of between one and five months continued to decline and made up just 2.0% (previous year: 3.2%)
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 41 Number of current accounts as of 31.12. (in thousand) 425.1 533.9 647.0 2008 2009 2010 improvement is particularly pleasing given that in the market as a whole, property sales declined due to a shortage of supply. In addition to the telephone advice service, the face-to-face local advisory services provided in the major real estate locations Berlin, Frankfurt/Main, Hamburg and Munich contributed significantly to this success. The number of sales partners increased by 63 to 153. As a result, we have at the same time improved our regional coverage and expanded the range of financing offers. In the fourth quarter of 2010 we launched Vorsorgeberatung PLUS provisioning advice service, which core business are customers who took out a provisioning product with former subsidiary comdirect private finance and are now serviced directly by comdirect bank AG. of the total volume. The deposit volume for time deposit accounts was 6.4% (previous year: 7.1%). We took the changes in the maturity structure into account when reinvesting customer funds (see page 45). Lending business The volume of utilisation of loans to purchase securities and draws on overdraft facilities by our private customers rose by 11.3% to 191.5m as compared with year-end 2009 ( 172.2m). This was in particular due to the increase in the volume of loans against securities which stems from higher utilisation on average. As the collateral values were also substantially higher, the limit utilisation levels were lower than in the previous year. There was also an increase in overdrafts on current accounts, primarily because of the rise in the number of accounts with overdraft facilities. comdirect bank acts as an intermediary for building finance and consumer loans. Both offerings therefore had no impact on the bank s lending volume. Business development in advice Our Anlageberatung PLUS concept convinced even more customers over the course of the year. At the end of 2010, over 1,300 customers were using the independent, system-backed portfolio advice service. Assets under advice totalled more than 100m. The systematic evaluation of customer feedback showed that customer satisfaction levels were high with regard to advisory expertise, the price model and performance in the various risk classes. Earnings situation in the B2C business line With pre-tax profit of 72.6m, the B2C business line almost matched the figure for the previous year ( 74.0m). Excluding the 4.5m provision recognised in the previous year for the withdrawal from the offices of comdirect private finance, this produces a 7.5% decrease in the operating result. This is due to the weaker result from financial investments as well as additional growth expenses in the fourth quarter. The cost/income ratio based on the operating result increased to 70.7% (previous year: 68.3%). The earnings components related to the comdirect group s deposit business net interest income, trading result, result from financial investments and the result from hedge accounting stem almost completely from the B2C business line. For further details, please see the explanation of these items at the comdirect group level (see pages 33 to 38). Net commission income totalled 130.6m up 17.0% on the previous year ( 111.6m). This was mainly ascribed to the increase in sales follow-up commission resulting from the greater fund volume, although the rise in the number of orders executed also had an effect. As expected, the commission contribution from the advice business declined as a result of the dismantling of comdirect private finance. The contribution to earnings generated by the direct bank-type advisory models was substantially greater compared to the previous year s figure. Baufinanzierung PLUS moved into profit in the reporting year. This was partly due to the increase of around 50% in the volume of building finance placed, which rose to 406m (previous year: 269m), while the number of advisers remained unchanged. The
42 At 175.9m, administrative expenses were up 5.5% on the comparative figure for 2009 ( 166.7m), which reflected the considerable restraint in marketing. Despite intensified product advertising in the previous year and higher order settlement costs, other administrative expenses rose by only 6.2%, owing to a reduction in communication and consulting costs. Moreover, in 2009 other administrative expenses included expenditures connected to the closure of individual comdirect private finance offices. The other operating result was 6.0m, thereby exceeding the previous year s figure ( 2.1m), which was affected by the revaluation of adviser balances as well as provisions for non-income related taxes. Pre-tax profit B2C (in million) 77.8 74.0 72.6 2008 2009 2010
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 43 > B2B business line Business development in the B2B business line ebase can look back on a successful financial year in 2010 and has strengthened its claim of being the leading B2B direct bank. Through intensified sales activities, ebase further improved its access to institutional partners. Of special note here is the legal migration of the custody account portfolios and customers of the AmpegaGerling investment company, covering around 49.6 thousand customers and a portfolio volume of almost 1bn, which was completed in the fourth quarter; new custody account business has also been carried out via ebase since June 2010. In the B2B business line, we thus further expanded the market position amongst the important customer group of insurance companies as well as white label banking for partners. Also in the fourth quarter, ebase launched a cooperation with another major independent intermediary pool. Major progress has been made in supplementing the custody account services with B2B-type banking solutions. The ebase Depot flex custody account, which links the custody account with a settlement account, was introduced in the first quarter and quickly became established in the market. Consequently, the volume of call money and fixed-term deposits also increased considerably. Custody accounts and portfolio volume At the year-end, ebase maintained 737.1 thousand custody accounts for their institutional partners, 37.2 thousand, or 5.3%, more than the year before. This primarily reflected the successful migration of new portfolio holdings. In contrast, when this effect is excluded, there was a slight decline. This was largely due to the cancellation in the first quarter of custody accounts for capital-building payments (VL contracts), which is usual for this time of year. The new Depot flex product already accounted for 10.2% of the total number of custody accounts. Many existing customers issued orders to switch and since the start of 2010, only the new custody account model has been used in the new business. As in the previous year, more than 80% of custody accounts were maintained as partner custody accounts, i.e. in a partner-specific configuration. The majority of these, as in the previous year continued to relate to the administration of custody accounts for investment companies; at the same time, the weighting shifted clearly towards white label products for insurance companies. At year-end 2010, the portfolio volume totalled 16.08bn. The rise of 20.9% on the previous year ( 13.30bn) was almost equally attributed to price effects and net fund inflows from insurance companies. In addition to the acquisition of the custody account administration for AmpegaGerling, the increase reflected growth in the OrderDesk custody accounts, which is used in particular for the underlying assets of fund policies. Furthermore, at the yearend, employees from 1,443 companies were saving towards their company pension provisioning scheme (bav). The fund volume attributable to bav custody accounts increased during the course of the year by 9.3%, to 1.20bn (end of 2009: 1.10bn). Along with the higher number of custody accounts, the rise in the average volume as a result of long-term asset accumulation was also a decisive factor here. Total assets under custody B2B as of 31.12. (in billion) 10.6 13.3 16.2 Custody accounts B2B as of 31.12. (in thousand) 729.6 699.8 737.1 2008 2009 2010 2008 2009 2010 Overall, the volume of assets under custody attributable to independent financial advisers, asset managers and liability umbrellas remained virtually stable. Net outflows on the part of end customers were almost compensated by price effects. With regard to investment companies, the portfolio volume decreased slightly due to the decline in the number of custody accounts and generally difficult market situation for investment funds.
44 The average portfolio volume climbed by 15.3%, to 21.9 thousand (previous year: 19.0 thousand) as a result of net fund inflows and price effects. Accounts and deposit volume There was an almost fivefold increase in ebase s deposit business in financial year 2010. After 26m at the end of 2009, the deposit volume amounted to 131m as of 31 December 2010. This was spread across 54 thousand accounts, with settlement accounts linked to the custody account comprising more than half. Earnings situation in the B2B business line There has been a marked improvement in the earnings situation in the B2B business line as compared with the previous year. Pretax profit rose to 8.3m (previous year: 2.0m). The figure for 2009 included restructuring expenses of 4.4m. Excluding this non-recurring effect, the result was up by 28.6%. The cost/income ratio (excluding restructuring expenses) improved from 83.4% to 80.5%. ebase has therefore substantially strengthened its competitive position. Despite the higher deposit volume, net interest income before provisions was in negative territory at 258 thousand (previous year: 325 thousand). The additional expenses resulting from interest rate campaigns were the main reason for this. The other operating result amounted to 0.4m. The previous year s figure ( 1.4m) included a non-recurring effect of 1.3m from the refund of special contributions by ebase to the Entschädigungseinrichtung der Wertpapierhandelsunternehmen (EdW German Compensatory Fund of Securities Trading Companies). At 34.1m, administrative expenses were up 5.8% on the comparative figure for 2009 ( 32.2m). The 18.2% increase in other operating expenses resulted from marketing measures for banking products as well as the expanded ETF business. Furthermore, higher IT expenses along with the costs associated with relocating the company s office also had an effect here. Personnel expenses were 3.4 % lower than in the previous year, reflecting the initial effects from the implementation of efficiency improvement measures. Pre-tax profit B2B (in million) 8.3 5.0 2.0 2008 2009 2010 Net commission income increased to 42.1m (previous year: 37.1m). The higher fund volume on average for the year led to a rise in sales follow-up commission. This was countered by a slight decline in custody account fees received, since in the first three quarters, the number of custody accounts was down on the previous year. Net commission income also includes a non-recurring effect from the conclusion of negotiations on terms and conditions with a partner organisation in the second quarter.
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 45 > Financial situation and assets of the comdirect group Main features of financial management and Treasury The Treasury department of comdirect bank ensures adequate cash holdings at all times and manages the liquidity risk (see page 59). Once again as a result of the liquidity surplus provided by customer deposits, there is no need to raise additional liquidity. By investing customer deposits in the money and capital markets, the comdirect group achieves a positive interest margin. Here, the bank carries out a significant share of the investments with companies in the Commerzbank Group; these investments are comprehensively collateralised. There are also five special funds that are included in the comdirect group s accounts. We maintained our conservative and risk-aware treasury strategy in the reporting year. Due to the relatively flat interest rate curve and spread volatilities that remain high, we almost exclusively acquired securities from first class issuers with shorter term fixed interest rates. When reinvesting call money, we predominantly used floating rate notes as well as fixed-term deposits. Furthermore, the Treasury portfolio essentially comprises bonds and Pfandbriefe. Only about 3.5% of the comdirect group s balance sheet total is attributed to Treasury positions in the PIIGS countries (Portugal, Italy, Ireland, Greece, Spain). The sovereign debt crisis in Europe worsened again in 2010 and at times led to significant market fluctuations in these positions, but there were no losses from issuer defaults during the entire reporting period. The comdirect group s PIIGS exposure is intensively monitored on a continuous basis. Reducing this position even further remains a strategic goal. The exposure was already steadily reduced in 2010, in part through sales as well as maturities. By the end of 2011, we plan to reduce the share of PIIGS exposure by around 70%. The decrease will mainly be achieved through maturities. The bank more than complied with the regulatory capital requirements at all times. The equity ratio and the core capital ratio amounted to 43.0% (previous year: 45.5%) as of 31 December 2010. It corresponds to comdirect bank AG s own equity in relation to the risk-weighted assets, taking operating risks into account. The use of derivative financial instruments was restricted to an interest rate swap with a nominal volume of 20m acquired during the reporting year. This serves to hedge a bond and the valuation result is recorded under hedge accounting. Investments At 12.4m, the investment volume was down slightly on the figure for the previous year ( 12.6m). Of this, 8.1m (previous year: 9.9m) was attributable to the B2C business line and 4.3m (previous year: 2.6m) to the B2B business line. Investments (in million) 11.2 7.4 9.1 3.4 The balance sheet additions with regard to intangible assets totalled 9.0m (previous year: 9.1m). As in 2009, the majority of these related to internally generated software, especially for the technical migration of the application and system environment, the expansion of brokerage functionalities as well as modernisation of the website. 2.9m (previous year: 1.2m) was used for the acquisition of software, including a new email response system in Customer Services. Taking account of depreciation on intangible assets, the net investment volume stood at 0.4m (previous year: 1.4m). Fixed asset investments remained unchanged at 3.4m as in the previous year and were exclusively attributed to office furniture and equipment, primarily network and server components. Net investments in office furniture and equipment totalled 1.4m (previous year: 1.2m). There are no material subsequent financial obligations arising from current investment projects for financial years 2011 and 2012. Balance sheet structure of the comdirect group 9.0 3.4 2008 2009 2010 Intangible assets Other furniture and equipment The balance sheet total increased during the year as a result of the higher deposit volume and at 11.04bn, was up by 12.8% as compared with year-end of 2009 ( 9.79bn).
46 Structure of consolidated balance sheet ASSETS (in million) 275 228 4,032 6,624 339 206 4,479 4,761 2008 2009 2010 237 238 4,671 5,894 Other assets Claims on customers Financial investments Claims on banks The cash reserve amounted to 185.0m as of 31 December 2010 (end of 2009: 282.8m) and was thus close to the comdirect group s minimum reserve requirement of 190.3m (end of 2009: 174.6m). Current income tax assets in the amount of 4.1m (previous year: 3.8m) were partially attributed to corporate tax credit balances from previous years. Structure of customer deposits (by remaining lifetimes in %) 8.6 12.9 78.6 5.9 4.3 89.8 6.5 2.6 90.9 Assets The assets side reflects the stronger weighting given to promissory notes in the Treasury strategy. Claims on banks increased by 23.8% to 5.89bn during the year (end of 2009: 4.76bn). At 4.67bn, the volume of financial investments recorded only a moderate rise of 4.3% as compared with the year-end 2009 ( 4.48bn). This line item mainly comprises bonds and notes, and to a much lesser extent, money market instruments as well. As in the previous year, equities were of little consequence. Structure of consolidated balance sheet LIABILITIES (in million) 177 10,506 127 9,125 158 10,368 2008 2009 2010 More than three months Up to three months Due on demand and unlimited in time Financing The financing side of the balance sheet essentially comprises the deposits of private customers. Liabilities to customers increased during the year to 10.37bn (end of 2009: 9.12bn), corresponding to 93.9% (previous year: 93.3%) of the liabilities. Liabilities to banks in the amount of 40.8m (previous year: 0.9m) mainly stem from the ongoing clearing account at Commerzbank. 475 533 2008 2009 2010 514 Other liabilities Liabilities to customers Equity As of the reporting date, the interest rate swap with a nominal volume of 20m used to hedge a bond showed a negative fair value of 38 thousand. There were no hedges in the previous year. Claims on customers increased to 237.5m (end of 2009: 206.2m), with the higher volume of loans against securities accounting for the greatest share. As a result of the price-related growth in collateral values, the overdraft limits granted increased during the year. The rise in overdrafts on current accounts is primarily due to the higher number of accounts. Provisions dropped to 44.0m (end of 2009: 49.6m). This was due in particular to other provisions, which decreased from 36.6m to 29.6m. The main factors here were the utilisation and writing back to income of a part of the restructuring provisions recognised in the previous year, the volume of which decreased to 3.0m (previous year: 8.9m),
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 47 the reversal of the provision for contingent losses recognised in 2004 in respect of the sale of comdirect ltd ( 1.0m) at that time. A large share of allocations related to variable compensation components (see note (49), starting on page 98). In the reporting year, there was a payment of 0.6m under the comdirect group s Long Term Incentive Programme (LTIP) as a result of the share price performance since the performance shares were issued. The provision for outstanding performance shares increased to 1.7m. Performance shares were first issued to members of the Board of Managing Directors as well as specialist and executive employees in 2005 as part of the Long Term Incentive Plan. Provisions for pensions and similar obligation amounted to 14.4m as of 31 December 2010 (end of 2009: 12.9m). Pension obligations with a net present value of 19.2m (previous year: 17.4m) were countered by plan assets with a market value of 3.8m (previous year: 3.7m) administered by Commerzbank Pension Trust e. V. (see note (49), starting on page 98). Other liabilities amounting to 53.8m (previous year: 42.9m) primarily comprise trade liabilities. Deferred income tax liabilities totalled 14.8m (previous year: 18.9m). These were essentially recognised in relation to financial assets, mainly with an income-neutral effect. Assets and liabilities are netted in the line item (see note (50), starting on page 101). Equity amounted to 514.2m, a decline of 3.6% as compared with 31 December 2009 ( 533.4m). Consolidated profit rose slightly, while the revaluation reserve experienced a negative development. The drop to 30.7m (end of 2009: 51.6m) was due in particular to the moderate rise in interest rates as well as the widening of credit spreads which was reflected in the valuation of securities in the available for sale category. Cash flow statement of the comdirect group The cashflow arising from operating activities, which amounts to 33.0m (previous year: 170.9m) was as in the previous years predominantly affected by the development of customer deposits and the Treasury portfolio. The cash inflow generated by the higher customer deposits basically matched the cash outflow arising from the reinvestment. As a result of the lower investment volume as well as cash inflows attributed to the sale of a property, the cash outflow from investment activities only totalled 6.9m (previous year: 12.4m). The cash outflows arising from financing activities, which total 57.9m (previous year: 85.2m), stem exclusively from the dividend distribution of 0.41 per share in May 2010. The figure for 2009 also includes a payment of 24.9m for the acquisition of ebase. Also included is a profit distribution for financial year 2008 by ebase to its former parent company Commerz Asset Management Holding. As of the reporting date, the comdirect group had a cash reserve of 185.0m ( 282.8m). This is almost completely attributed to credit balances with the Deutsche Bundesbank. Deposit protection comdirect bank AG and ebase GmbH are members of the deposit insurance scheme of the Bundesverband deutscher Banken e.v. (Association of German Banks), through which each customer was insured up to a deposit amount of 109.5m (comdirect) or 5.1m (ebase) as of 31 December 2010. In addition, customer deposits are legally insured under the compensation fund of German banks (Entschädigungsfonds deutscher Banken/EdB).
Anne Gifhorn and Lutz Selle Our employees represent the PLUS offered by our direct bank-type advice. Employees such as financial adviser Anne Gifhorn, who finds the right building finance product for her customers, and investment adviser Lutz Selle, who provides valuable, system-backed recommendations for the implementation of individual investment strategies.
With its direct bank-type models, comdirect covers the key areas of advice for its bank customers. Whether it concerns the optimum portfolio mix or favourable real estate loans, the aim is to always create maximum market transparency for customers, provide independent advice on the options available and find the most suitable solution for each individual. What investment advice service can claim to adopt a strictly objective advisory approach? A service that is completely independent of individual product providers and readily places investments products that generate very little commission? A service that is transparent about all the advice-related costs? Anlageberatung PLUS offers all these advantages, yet it is still no easy task to establish such an innovative model. Not least because in traditional investment advisory services, the bank s fees are hidden in front-end loads and sales follow-up commission, making such advice appear free of charge at first glance. Nevertheless, by the end of 2010, comdirect bank had convinced more than 1,300 customers of the benefits of the Anlageberatung PLUS investment advice service. Together, these customers have a portfolio volume of over 100m. Satisfaction levels are high: the investment advisors, who are certified by the Frankfurt School of Finance & Management, are praised for their expertise and the price model is deemed to be fair. Above all however, customers that have relied exclusively on the system-backed recommendations saw their investments perform well in 2010. The system is working, affirms investment adviser Lutz Selle. The portfolio is analysed every trading day using the risk profile of the respective investor and market volatilities. The system therefore responds rapidly to trend changes. In line with the jointly developed strategy, each investor is allocated to one of six risk classes. Based on the individual maximum and minimum volatility limits specified in this way, model portfolios are compiled from twelve different asset classes and updated every two months; in addition, the system, which uses a technical portfolio analysis approach, evaluates the individual securities within the asset classes every two weeks. The customer then decides whether to implement the action recommendations derived by the system. Many follow our recommendations, says Selle, and have done well.
Building finance: be a participant not a bystander Customers using our Baufinanzierung PLUS building finance advice have also done well, securing very favourable terms and conditions as a result of the product overview and independent advice we offer. For the third time in a row, Baufinanzierung PLUS won the award for best direct building finance placed by banks. The volume of building finance placed was up by around half on 2009, to 406m. As planned, Baufinanzierung PLUS reached breakeven in 2010. This success was primarily attributable to the substantial rise in the number of financing partners, which increased by 63 to 153. The result: a greater regional presence and more product variety. Secondly, a larger number of consultations resulted in the conclusion of a financing agreement, partly thanks to continued investment in the quality of the advice we offer. Whether at the end of the telephone or in our four offices in Berlin, Frankfurt/Main, Hamburg and Munich: all our advisers are highly trained and certified. We also benefited from the growing demand for property and higher property prices in major conurbations. Building finance is complex, stresses financial adviser Anne Gifhorn. That is why we support customers throughout the entire process, from the initial discussion through to disbursement of the loan. A new online tool, which was extensively tested in 2010 and rolled out at the end of the first quarter of 2011, will also strengthen the customer-adviser relationship in direct sales. The comdirect online advice tool enables potential customers to see sections of the adviser s screen during the phone call so that, together with the building finance adviser at comdirect, they can select the financing that is right for them. This means the customer is a participant rather than a bystander, explains Gifhorn. Understanding customer needs providing intelligent advice With Baufinanzierung PLUS we are operating in an attractive market environment. This is because the persistently low interest rates mean that customers can currently secure long-term financing at favourable terms and conditions. Our comdirect Building Finance Sentiment Index climbed to a new record level at the end of 2010/start of 2011. One in two respondents was convinced that now is the ideal time to consider property finance, and at least 43% of Germans still believe they could afford such a loan. The optimistic sentiment is pleasing, comments Tobias Lücke, Divisional Manager Building Finance. However, anyone inten - ding to finance a house or apartment should not rush into things, but keep a cool head and carefully compare all the terms and conditions. The demand for advice is great, as many prospective customers still do not understand the different types of mortgage or the main components, and only one in three is considering using a state subsidy. Even when mortgage interest rates are low, this is frequently a mistake, as Lücke explains: Many banks treat a KfW development bank loan as the borrower s equity and consequently this financing often works out considerably cheaper overall. To precisely tailor the advice to the needs of customers, comdirect employees intensively monitor market and customer trends, and their findings generated widespread media interest. For example, in summer 2010 we published a survey Wohnen heute und im Jahr 2020 (Living today and in 2020) in cooperation with the Hamburg Institut für Management- und Wirtschaftsforschung (Institute for Management and Economic Research). The results were interesting: for instance, we now know that nearly one in two people renting at the moment would like to realise the dream of owning their own home in the next ten years. And that Germans consider property better protection against inflation than gold. And that on average, women are more intuitive in their decision-making than men when it comes to purchasing a house or apartment. Further insights were provided by our comparison of the four metropolitan regions, in which Baufinanzierung PLUS is represented through its own offices. The criteria included growth prospects, population density and the percentage of children. The long-term performance of a location must always be taken into account, explains Gifhorn. Even when the owner intends to use the property himself long term, the option of a subsequent sale should be factored in from the outset. Growing together and leveraging potential Further growth is on the cards for the advice services with the added PLUS, particularly as a result of increased marketing to existing customers in B2C business. For example, video tutorials are being used to explain the benefits of Anlageberatung and Baufinanzierung PLUS as of the first quarter of 2011.
48 > The share Share price performance, trading volume, shareholder structure With a price increase of 8.9% to 7.20 and a total shareholder return of 15.1%, comdirect shares were a good investment for shareholders in 2010. While our shares did not match the strong performance of the SDAX (45.8%), they fared better than many other financial stocks. The DAXsector Financial Services Performance Index recorded a gain of only 5.3%. Driven by the positive development in the capital market environment and strong trading, comdirect shares reached their high for the year at 8.30 on 26 April. The low of 6.44 on 4 October reflects the ongoing negative market sentiment with regard to financial stocks, partly as a result of the sovereign debt crisis in the eurozone. The subsequent recovery phase continued in the first few weeks of the new year. In January 2011, our shares recorded further positive development and outperformed the SDAX with a price rise of 13.9%. As of 31 December 2010, Commerzbank AG continued to indirectly hold 80.53% of the shares, with 19.47% of the shares in free float. The closing price at year-end 2010 yields a market capitalisation of 1,016.8m. Of this amount, 198.0m was attributable to free float. This market capitalisation again puts comdirect bank AG in the middle of the SDAX. On average, 63.4 units were traded a day, 12.1% less than in the previous year. Of this trading volume, 86.6% was traded on XETRA and 9.3% on the Frankfurt stock exchange. Investor Relations The comdirect group believes in maintaining an active dialogue with private investors, institutional investors and analysts. This is based on both transparent and timely financial communications. The CEO, CFO and Investor Relations team of comdirect presented the strategy and business development at roadshows, conferences and numerous individual meetings with investors and analysts. Highlights here include the Cheuvreux German Corporate Conference in Frankfurt/ Main, the LBBW German Conference in London and the German Equity Forum held by Deutsche Börse and DVFA in Frankfurt/Main. comdirect bank AG is currently regularly evaluated and rated by eight research institutes. Around 450 shareholders attended our annual general meeting in Hamburg on 7 May 2010. With a presence of 83.97% of the share capital, all voting items on the agenda were passed with clear majorities of between 99.84% and 99.99%. The entire event was broadcast live on comdirect s website for the first time. Shareholders could choose to exercise their vote in writing or by proxy voting via the internet. comdirect bank s financial reporting once again met high requirements in terms of timeliness and transparency in the reporting year. We presented our quarterly figures in conference calls, the recordings of which were made available as on-demand versions on the website along with the presentation. The analysts confer- Development of share price of comdirect share 30.12.2009 to 30.12.2010 (in ) 6.60 8.30 6.44 7.20 Jan Feb March April May June July Aug Sept Oct Nov Dec comdirect share SDAX DAXsector Financial Services Performance Index Source: Bloomberg; Indices normalised to the comdirect share price as of year-end 2009
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 49 ence was broadcast live on the internet and is also available as a recording online. As in the past, all financial reports were published earlier than required under the German Corporate Governance Code. The information provided is supplemented by the monthly publication of the key operating figures. The 2010 annual report is published on 22 March 2011 and is available in printed form and as an interactive online version in German and English. Data and key figures of the share 2010 German securities code no. 542 800 ISIN code DE0005428007 Stock exchange code COM Reuters: CDBG.DE Bloomberg: COM GR Award-winning Investor Relations Stock exchange segment Number of shares issued Designated sponsor SDAX 141,220,815 no-par-value shares Commerzbank AG A reader survey conducted by German financial magazine Börse Online put the comdirect bank amongst the top ten companies in Germany in 2010 with respect to the quality of the Investor Relations. We ranked third out of the SDAX companies in the 2010 BIRD (Best Investor Relations Deutschland) survey and came in as the sixth best company in the overall ranking. The assessment criteria included accuracy and amendment of forecasts, timeliness and up-to-dateness, comprehensibility and credibility as well as the annual and quarterly reports. The 2009 annual report won a bronze medal at the Vision Awards of the League of American Communications Professionals LLC (LACP) and once again ranked as one of the top ten SDAX companies in manager magazin s Best Annual Report competition. Shareholder structure 80.53% Commerzbank AG 1) 19.47% Free float Key figures 2010 Average daily turnover in units XETRA 54,853 Frankfurt 5,884 Other stock exchanges 2,623 63,360 Opening quotation XETRA (4.1.2010) 6.60 Highest price XETRA (26.4.2010) 2) 8.30 Lowest price XETRA (4.10.2010) 2) 6.44 Closing quotation XETRA (30.12.2010) 7.20 Market capitalisation (30.12.2010) 1,016.8m Earnings per share 0.42 1) Indirectly 2) Daily closing quotation
50 Key figures of comdirect bank share five-year overview 2010 2009 2008 2007 2006 Earnings per share 1) 0.42 0.40 0.43 0.41 0.40 Dividend per share 0.42 2) 0.41 0.41 0.41 1.40 3) Opening quotation 6.60 6.18 8.46 9.40 8.10 Highest price 4) 8.30 7.02 9.62 13.28 10.75 Lowest price 4) 6.44 4.57 4.54 7.95 7.45 Closing quotation 7.20 6.61 6.18 8.36 9.23 Number of shares 141,220,815 141,220,815 141,220,815 141,220,815 140,824,172 Market capitalisation (last trading day) million 1,016.8 933.5 872.7 1,180.6 1,299.8 Performance 5) % 8.9 7.0 26.1 9.4 16.0 TSR 6) % 15.1 13.6 21.2 5.7 19.0 Dividend yield 7) % 5.8 6.2 6.6 4.9 15.2 P/E ratio 8) 17.1 16.5 14.4 20.4 23.1 XETRA trading volume 9) 54,853 62,693 105,944 194,888 140,120 Frankfurt trading volume 9) 5,884 6,918 10,656 28,655 19,113 1) As of 2008 including the contributions of ebase 2) Dividend proposal 3) Including special dividend 4) Daily closing quotation 5) Based on the respective closing quotation at year-end 6) Sum of the share price increase and dividend in relation to the share price as of the end of the previous year 7) Based on the dividend proposal and closing quotation at year-end 8) Based on closing quotation at year-end and earnings per share 9) Average daily turnover in units comdirect share daily turnover 2010 (in 1,000 units) 101.0 107.2 98.4 78.9 54.5 47.4 49.9 Jan Feb March April May June July Aug Sept Oct Nov Dec 36.0 43.5 53.1 42.0 58.6 Average 2009 XETRA Frankfurt Other stock exchanges Source: Bloomberg
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 51 > Personnel report Recruitment and retention management Number of employees of comdirect group as of 31.12. At the end of 2010, 1,120 staff members were employed in the comdirect group. This corresponded to 1,002.9 full-time positions. At 897, the number of employees in the B2C business line at the end of 2010 remained unchanged from the previous year. Customer Services continued to have the largest number of staff, followed by IT. The growth-related new posts in the advisory fields were essentially filled by providing in-house training for employees from Customer Services. In the B2B business line, surplus capacities in Customer Services were started to be reduced in the reporting year. Consequently, the number of employees fell by 35 year-on-year to 223. 906 897 897 257 258 223 2008 2009 2010 business line B2C business line B2B Organisational development Executive and team development ebase completed the restructuring measures launched at the end of 2009 ahead of schedule in the fourth quarter of 2010. Working in constructive cooperation with the Works Council, a socially responsible voluntary scheme was agreed upon. 53 employees accepted the offer of voluntary termination of employment and all exits will be completed by the end of 2011. This action was necessary in order to reduce existing excess capacities and secure a stronger competitive position for ebase by improving the cost/income ratio. Throughout the downsizing process, intensive support was provided by the HR department in the form of advice and outplacement services. In conjunction with the withdrawal from face-to-face local advisory services, we offered the permanent staff members of former subsidiary comdirect private finance AG positions within comdirect bank AG as well as associated training measures. Nearly all of the employees took up this offer. The various formats for systematic executive and team development continued in financial year 2010 with a focus on the B2C business line. Moreover, we have established the specialist Executive Advisor function, with the aim of providing executive and managerial staff with even more extensive and targeted support in all topics of management. In the first half of 2010, we once again took part in an extensive employee survey. The survey, conducted by TNS Infratest, showed that employee identification with comdirect bank is constantly high. The increase within Customer Services was particularly significant. Competence and talent management Our competence and talent management activities were supplemented by a series of new measures and also partially realigned during the reporting year. A key aspect here is the qualification campaign in Customer Services: building on the proven comahead multi-stage qualification programme, we are the first direct bank in Germany to now offer our employees Chamber of Industry and Commerce (IHK) certification. By the end of the reporting year, after several weeks of preparation at the Wirtschaftsakademie Schleswig-Holstein (Schleswig-Holstein Academy of Business and Administration), twelve employees had already successfully passed the exam for the Customer Services Financial Services (IHK) certificate. The certification programme will be gradually offered to all employees in Customer Services. Going forward, we plan to introduce and harmonise staff development tools throughout the group.
52 Since October 2010, again six university graduates have been preparing for specialist functions in various departments under the comdirect graduates training programme. In the future, the plan is to offer the programme on a regular basis, with a focus on markets, sales and operations. Moreover, a specific training programme is currently being developed for talented young specialists and managers to foster and enhance their specialised expertise and personal skills. We have also continually met our responsibility as a company that takes on trainee positions. In financial year 2010, six prospective bankers commenced their training with the comdirect group (B2C business line), while ten successfully completed their training and were offered jobs. At the end of 2010, the number of trainees totalled 21 (previous year: 27). Furthermore, in conjunction with Nordakademie Elmshorn University in Schleswig-Holstein, we offer a dual study programme that centres on business information technology. Efficiency and performance management In the reporting year, against the backdrop of changes in legislation, especially the law passed in June 2010 pertaining to the regulatory requirements imposed on the compensation system of banks and insurance companies as well as the associated executive compensation regulation for banks, we started the process of further developing our performance-based compensation system. The aim is to make the system even more transparent and to align it even more strongly with the interlinking of variable compensation elements and the strategic goals of the bank. The compensation system for the Board of Managing Directors is also being revised, and details on this can be found in the compensation report. At year-end 2010, a total of 80 (previous year 60) comdirect bank employees participated in the Long Term Incentive Programme (LTIP) (see note (25) starting on page 84). In 2010, the performance shares issued in 2007 became due for payment following the expiry of a three-year waiting period. As a result of the relative TSR outperformance, 628 thousand was paid to the specialist and executive employees.
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 53 > Risk report Risk-oriented overall bank management The overall aim of comdirect group is to generate a sustainable attractive return on equity with a controlled level of risk at all times. Consequently, we do not assess risks on an isolated basis but as an integral part of overall bank management. In every market and corporate phase, the aim is to secure an optimum risk/return ratio taking external and internal factors into consideration and allowing for comdirect bank s risk-bearing capacity as well as regulatory requirements. Deviations from the targets set can be identified promptly and their causes analysed. A consistent risk strategy is developed on the basis of the comdirect group s sustainable business strategy and determined by the Board of Managing Directors of comdirect bank AG. This strategy specifies the extent to which the bank is prepared to take on risk in order to utilise opportunities. Separate risk strategies for all material risk categories are defined in the overall risk strategy. The comdirect group pursues fundamentally low-risk business models, which are based on generating net commission income and net interest income in brokerage, banking and advice. Limits are set for risks which can be quantified and compliance with these limits is monitored on a continual basis. Risk management, controlling and reporting Our risk management and controlling system forms the basis for implementation of the risk strategies. The system enables us to identify risks at an early stage, assess them under various assumptions and scenarios, and carefully manage them. We are therefore in a position to take measures immediately to counter risks in the event of any unwanted developments. The procedures with which we measure, aggregate and manage risks are enhanced continually on a best practice basis. In this respect, we are closely integrated into the risk management systems of Commerzbank. The comdirect bank Board of Managing Directors is responsible for the risk management and controlling system of the comdirect group. The Board specifies the permissible total level of risk and its allocation across the individual risk types and business divisions. At comdirect bank, the CFO (Chief Financial Officer) independent from the overall responsibility is responsible for monitoring and implementing the risk strategy. The task of risk management at comdirect group is to identify, measure, assess and manage as well as monitor and communicate all risks in the respective risk category. The management is carried out partly on a centralised basis, for market and liquidity risks for instance, and partly on a decentralised basis, as in the case of operational risks. With the aid of a risk inventory, we obtain an ongoing overview of the main risks and examine whether and to what extent these risks may adversely affect the financial situation, including the capital levels, earnings situation or liquidity situation. The Risk Monitoring department is responsible for risk controlling. It monitors, evaluates and aggregates risks for the bank as a whole. In addition, the department implements regulatory requirements and monitors compliance with them. Comprehensive and up-to-date risk reporting forms an essential part of the risk management and controlling system. The Board of Managing Directors receives regular risk status reports. Major risk indicators are included in the overall management of comdirect group. Risk status reports among other reports provide information on the current development of major risk categories and are therefore integral to our early risk warning and monitoring system. With the aid of the risk radar included in the status reports, we promptly identify developments that require countermeasures. Internal Audit regularly checks the functionality and suitability of risk management activities pursuant to the minimum requirements for risk management (MaRisk). Inclusion in the Commerzbank Group The comdirect group is included in risk management processes of the Commerzbank Group to identify, measure, assess and manage as well as monitor and communicate risks. Against this backdrop, the bank makes use of the waiver regulation under Section 2a of the German Banking Act (KWG). As a subsidiary of Commerzbank AG, it is exempt from applying the regulations of Section 10 of the German Banking Act (KWG) (Reporting of own funds to the Federal Financial Supervisory Authority) and Section 13 of the German Banking Act (KWG) (Notification of major loans of more than 10% of the liable capital to Deutsche Bundesbank). As a result of this integration, comdirect bank meets the requirements in the three pillars of Basel II as follows: The first pillar of Basel II relates to the approaches for measuring credit, market and operational risk, which are used to calculate the minimum capital requirements of a bank. For internal management purposes as well as for the Commerzbank Group s risk management, we determine the overall risk position of the comdirect group using advanced procedures. Credit risk is mostly assessed using the Advanced Internal Ratings Based Approach (AIRB). With regard to operational risks, the comdirect group uses the Advanced Measurement Approach (AMA).
54 The minimum requirements for risk management for banks and financial services institutions (MaRisk), the second pillar of Basel II, are also complied with throughout the comdirect group. These relate to the implementation of internal procedures, which are to be checked by the regulatory authorities and are used to assess the risk situation and appropriate capital levels, which are based on the respective risk profile of the comdirect group. The third pillar of Basel II relates to the disclosure of risks pursuant to the detailed regulations under the Solvency Regulation (SolvV). Here the parent company, Commerzbank AG, meets the requirements for compliance for the Commerzbank Group as a whole. Adjustments during the reporting year During the reporting year, we completed implementation of the MaRisk regulations that were amended in the third quarter of 2009. The changes we have made include revising the design and execution of stress tests and taking adequate account of risk concentrations. The risk-bearing capacity has already been examined as required for the corporate group as a whole, that is for the comdirect group, including ebase, since 2009. During the year, the Federal Financial Supervisory Authority initiated a further revision of the MaRisk. This came into force on 15 December 2010 and must essentially be implemented by the end of 2011. In the future, institutions must make their risk-bearing capacity calculation more future-oriented, by taking account of intended adjustments in business activities and strategic goals as well as expected changes in the market environment, establish a process for planning, adjusting, implementing and assessing their strategies that facilitates a precise target/actual comparison of goals and the level of implementation achieved, by taking into account risk concentrations, set tolerances for all material risks and in addition, analyse the effect across all risk types of such concentrations and design stress tests so that they also encompass the risk concentrations and diversification effects between individual types of risk and moreover, identify possible causes of risks that jeopardise the existence of the company (inverse stress tests). Capital market-oriented institutions also have to maintain adequate financial resources and highly liquid assets eligible for central bank borrowing in order to be able to bridge a short-term funding requirement for at least a week in the event of stress situation. Other components of the liquidity reserve may be used for the time horizon of at least one month, as long as they can be made liquid without significant losses in value and in compliance with regulatory requirements. Through these requirements, the MaRisk is promptly implementing the Basel Commission s stipulations regarding the liquidity management of banks. The comdirect group has initiated all the measures to implement the new requirements under the revised MaRisk regulations. For the purpose of further developing the Internal Control System (ICS), we launched a project to survey and evaluate all the relevant processes, which also includes setting up the corresponding control tests; the project is intended to help us meet increased requirements. The project should be successfully concluded in the first quarter of 2011. The requirements relating to the compensation systems of banks, which were defined in 2009 by the Bundesanstalt für Finanzdienstleistungsaufsicht (German Federal Supervisory Authority) resulted in the course of the year in the law on regulatory and supervisory requirements for the compensation systems of banks and insurance companies as well as the associated regulation governing the compensation systems of institutions (Instituts-Vergütungsordnung), which came into force in October 2010. Under the new regulation, amongst other factors, compensation systems must be designed so that they are geared toward achieving the strategic goals, there is an appropriate relationship between fixed and variable compensation, they do not provide the incentive to enter into disproportionately high risk exposures, and they do not run contrary to the monitoring function of the control units.
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 55 The corresponding revision of the comdirect group s compensation system was commenced during the reporting year. Both the compensation system for the Board of Management and for the staff are currently under revision. The special requirements stipulated by the regulation governing the remuneration of systems of institutions for important institutions do not apply at the level of comdirect group. Risk categories of the comdirect group We classify risks in line with the German Accounting Standard DRS 5-10 and distinguish between market risk, credit risk, liquidity and operational risk. In addition there is business risk, which is also included in the risk-bearing capacity calculation as a key risk. A market risk describes the potential loss on positions in the bank s own portfolio caused by future market price fluctuations. A distinction is made between general changes in market prices and a specific market risk related to individual financial instruments. With regard to risk types, we distinguish between interest rate, credit spread, equity price and currency risks. The main market risks for the comdirect group are the interest rate risk and the credit spread risk in the banking book. The interest rate risk arises, in particular, from maturity transformations, i.e. the mismatching of fixed rates on assets and liabilities. The credit spread risk results from changes in risk premiums on bonds against a low risk reference interest rate. Assets essentially comprise bonds and promissory notes as well as money market deposits with other financial institutions, which are used for the investment of customer deposits. If required, interest rate swaps and forward rate agreements are concluded for the purposes of hedging and general interest book management. The credit risk describes the risk of a financial loss which arises when a borrower is unable to pay or to pay on time the contractually agreed consideration. This primarily includes counterparty and issuer risks arising from transactions in the money and capital markets, as well as credit risks in retail business. Liquidity risk in the narrower sense is understood as the risk that the bank will be unable to meet or to meet on time its current and future payment obligations. The broader definition of liquidity risk also encompasses refinancing risk, which is the risk that the liquidity will not be sufficient if required or that it can only be acquired in the money and capital markets at terms that are significantly less favourable than expected, as well as market liquidity risk. The latter describes the risk of being unable to close out securities positions to the desired extent or only at a loss as a result of inadequate market depth or market disruptions. The liquidity risk is currently a material risk, as some positions can still only be converted to liquidity to a limited extent in the wake of the financial market crisis. Nevertheless, the liquidity risk is not included when calculating the risk-bearing capacity, since it cannot be usefully limited through risk cover potential. It is adequately taken into account in the risk management and controlling processes of the comdirect group. Operational risk are understood as possible losses resulting from the use of operating processes and systems that are inappropriate or susceptible to failure as well as human error and external events such as natural disasters or terrorist attacks. Often such incidents entail other secondary risks, especially reputation risks, which describe the risk of the public or customers losing confidence in the bank. Furthermore, operational risks comprise the legal risks resulting from contractual agreements or a change to legal framework parameters. Personnel risks are also classified as operational risks. These essentially comprise the potential loss of personnel in key positions, who play a major role in the success of the bank or its subsidiaries. Business risk encompasses possible losses from negative deviations from plans, which can result, for example, from changes in customer behaviour and in the competitive situation or from incorrect planning. Risk measurement concepts To measure the risk situation we use both the expected loss and the unexpected loss in various market scenarios. The expected loss describes the loss that can be expected within a year based on empirical values, for example on past losses. We calculate this figure for credit risks and operational risks. We determine the unexpected loss on a regular basis and aggregate it to form the overall risk position; this includes market risk, credit risk and operational risk as well as business risk. The overall risk position is measured uniformly using the economically required capital, i.e. the amount of capital that has to be maintained to cover unexpected losses from positions involving risk at a given probability within a year. This calculation also includes risk categories that do not require equity backing under banking regulations or do not require full capital backing, but which, from an economic viewpoint, represent potential material risk (market price risks and business risks).
56 comdirect bank adopts a very conservative approach when calculating the economically required capital using the value-at-risk (VaR) approach. On the one hand, we generally use a confidence level of 99.95% with a holding period of one year when calculating the VaR. On the other, with regard to the aggregation of the sub-risks to form the overall risk position, comdirect bank does not take into account any correlations that have a risk-mitigating effect. The overall risk position is matched by the risk cover potential, which comprise the (forecast) pre-tax profit, open reserves (capital and retained earnings) and the revaluation reserve. For reasons of prudence, the subscribed capital is not included. The risk-bearing capacity is guaranteed when utilisation of the risk cover potential by the overall risk position of the bank stands at less than 100%. Countermeasures are initiated as soon as the utilisation level reaches the defined early warning thresholds. Corresponding early warning threshold are also defined for each risk category. The value-at-risk model indicates the potential loss under predominantly normal market conditions. In order to assess extreme market developments as well, we carry out additional stress tests. Overall risk position in financial year 2010 The overall risk position of the comdirect group increased slightly in financial year 2010. At the year-end, the economically required capital stood at 146.6m, as compared with 124.7m at the end of 2009 (confidence level 99.95%, holding period one year). Of this amount, 17.0m (end 2009: 16.7m) was attributed to ebase. Breakdown of economically required capital 2010 (in million) As of 31.12.2010 As of 31.12.2009 Market risk 40.26 41.94 Credit risk 33.62 15.27 Operational risk 46.05 49.34 Business risk 26.69 18.14 Economically required capital 146.62 124.69 The limit utilisation level was consistently non-critical both with respect to the aggregate risk and all individual risks. The utilisation level of the overall limit was, with slight fluctuations, slightly above the level of the previous year, amounting to 36.2% as of 31 December 2010 (end of 2009: 29.1%). Even under stress conditions, the economic risk-bearing capacity remained constistent throughout the year. As of the reporting date, the risk weighted assets calculated in accordance with the requirements of the Solvency Regulation (SolvV) totalled 545.7m (end of 2009: 499.7m). All intragroup receivables in the Commerzbank Group were zero-weighted. Claims on Commerzbank AG and other subsidiaries of the Commerzbank AG are almost fully collateralised via a general assignment agreement; excluded from this are Pfandbriefe, which are collateralised by property loans eligible as cover assets. The economically required capital for market risks amounted to 40.3m as of 31 December 2010 and therefore varied only marginally from the previous year s figure ( 41.9m). The share of the overall risk of the comdirect group fell from 33.6% to 28.4%. The rise in market volatilities in the wake of the national debt crisis in the eurozone was countered by shortening of residual lifetimes and a further reduction of the share attributed to bank bonds from the debt-stricken peripheral eurozone countries. As a result of this measure, we limited the rise in total CVaR for credit risks to 33.6m (end of 2009: 15.3m) at the same time. The increase is essentially due to the rating migrations of individual positions in the Treasury portfolio. The operational risk reduced over the course of the year from 49.3m to 46.1m, partly as a result of fraud prevention measures. The business risk rose to 26.7m (end of 2009: 18.1m). The main reason for this was the ongoing
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 57 Market risks (in million) As of As of Year high Year low Median 2010 Median 2009 start of year end of year Total VaR 97.5%, 1 day holding period* 5.1 2.7 5.1 2.0 4.0 6.0 Stress test overall result 19.4 14.9 19.7 14.9 17.5 23.3 * Model see note (56) on pages 106 to 110. high level of planning uncertainty in the present interest rate and capital market environment. The method is described in detail in note (56), starting on page 106. To summarise, the comdirect group has a risk buffer that is definitely adequate enough to survive even lengthy weak market phases. From today s perspective, there are no evident realistic risks that could threaten the continued existence of the comdirect group. Market risk Risk management, quantification and reporting All trading transactions of the comdirect group have to comply with the requirements of the market risk strategy. When the Treasury department invests customer deposits in the capital market, we focus on securities with adequate market depth and liquidity. To manage market risks in the financial year, we used interest rate derivatives to a limited extent. We monitor market risks especially interest rate risks and credit spread risks in the banking book on a daily basis. A VaR model based on a holding period of one day and a confidence level of 97.5% is used for operative management. The VaR forecast is regularly subjected to backtesting to verify its informative value. Current risk situation With a VaR of 2.7m, the market risk was below the level at the end of 2009 ( 5.1m). Over the course of the year, the VaR fluctuated between 2.0m and 5.1m, and was therefore on the whole below the range of the previous year. At 17.5m (median), the overall stress value was also lower than in financial year 2009 ( 23.3m). As in the previous year, most of the market risk was attributable to credit spread and interest rate risks. Development in this item was largely stable, although credit spreads volatilities increased significantly in the wake of the national debt crisis in several peripheral eurozone countries. The reason for this was that comdirect bank had further reduced its already small portfolio of debt securities from banks in the debt-stricken euro countries through selective sales and scheduled expiries. As in the previous year, equity price and currency risks played only a minor role. The limits for all types of market risk were complied with consistently. The backtesting results did not show any irregularities over the whole year. To monitor extreme market movements and the extent of losses in the portfolios under worst case scenarios, the VaR calculations are supplemented by stress tests, whereby possible scenarios such as reversals, parallel shifts and flattening of market price curves, are simulated. In addition to interest rate, credit spread and currency scenarios, daily stress test calculations are also carried out for equity price risks in the special funds held by comdirect bank.
58 Utilisation of loans against securities and overdraft facilities (in million) of individual securities and it is no longer sufficient to secure the claims on customers. The decision to provide the loan is made with the aid of internal scoring models. 147.4 164.2 The comdirect group maintains an early warning system for the credit risks associated with the credit line and loans against securities. The necessary adjustments or cancellations of credit lines are carried out immediately. 24.7 27.3 J F M A M J J A S O N D Loans against securities Overdraft facilities Credit risks are quantified by calculating the credit value-at-risk (CVaR) for trading transactions (excluding intragroup receivables) and retail lending on a monthly basis. The method is described in detail in note (56), starting on page 106. Credit risk Specific loan loss provisions are recognised separately for each product type for customers in the significant lending business, provided a Basel II default criterion applies to those customers. Risk management, quantification and reporting Credit risks at the comdirect group primarily exist in the form of counterparty and issuer risks as a result of trading transactions. In addition, retail lending involves credit risks. Treasury acts as the front office for counterparty and issuer risks and Customer Services fulfils this function for retail lending. In accordance with MaRisk, other tasks are to be carried out by departments other than the front office departments. The back office tasks are carried out by the Credit Risk Management department for retail banking. The Finance department is responsible for the settlement of trading transactions. The Risk Monitoring department is in charge of the function of risk controlling. Trading transactions in Treasury are conducted within the limits approved by the Board of Managing Directors of comdirect bank AG as well the Group-wide requirements of Commerzbank. These limits are defined for both counterparties and issuers as well as for the underlying transactions. In the capital market, in principle, comdirect bank only takes direct positions in the investment grade segment, for example with an external rating of BBB- (Standard & Poor s) or Baa3 (Moody s) or better. When assessing the credit rating, comdirect bank uses both the internal ratings of Commerzbank AG in accordance with the AIRB approach as well as those of the external rating agencies. In retail lending in the B2C business line, a distinction is made between loans against securities which fall due on demand and the overdraft facility on the comdirect current account. Loans against securities are secured by pledged securities. Potential losses may arise if the price of the pledged securities falls as a result of the general market development or specific market risks Portfolio loan loss provisions are recognised for all other customers with claims and/or existing credit lines. The level is primarily influenced by the level of claims and open lines, allowing for conversion factors, the level of the expected probability of default, the consideration of collateral and the recovery rate. Called-in claims, which we hand over to collection agencies for recovery, are written down in the amount of the loss incurred. Current risk situation The rise in the total CVaR to 33.6m at the end of 2010 (end of 2009: 15.3m) is mainly due to rating migrations for individual counterparties. This more than offset the opposing effect from the reduction in the credit exposure to counterparties outside the Commerzbank Group. Despite the individual downgrades, the average rating in the Treasury portfolio remained unchanged at A2 (Moody s). In terms of external ratings, around 99.6% of the portfolio remained within the investment grade range. This high level also stems from the fact that individual bank debt securities from heavily indebted euro countries were sold prior to final maturity within the scope of the portfolio management.
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 59 At the end of 2010, 26% (previous year: 35%) of the banking book portfolio was invested short-term in the money market. The share of capital market investments increased accordingly, with the investment focus on promissory notes. Of the capital market investments, 0.47bn (previous year: 0.49bn) was attributable to five special funds which were invested almost exclusively in fixed-income securities (see note (70) on page 127). As in the previous year, over 90% of the portfolio was ascribed to German counterparties, with the rest fully accounted for by European issuing countries, and eurozone countries in particular. In retail lending in the B2C business line, the average total utilisation of loans against securities increased moderately year-on-year. The credit facility for loans against securities changed only marginally as compared with the previous year ( 2.65bn). In actual fact, however, potential utilisation of the credit facility is restricted through the specific collateral value of the respective securities portfolio. As a result of price gains in the equity markets, the collateral value increased during the year from 781m to 870m. As in the previous year, equities accounted for around two-thirds of the collateral portfolio. Following the price surge, the number and volume of overdrafts during the financial year were, on average, below the previous year s figure. As a result, the number of default action processes also decreased. On average during the reporting year, the utilisation rate of the credit facility for loans against securities provided by the bank stood at 19.4% (previous year: 21%); as of the reporting date, the volume of loans against securities amounted to 164m (previous year: 147m). Overdraft facilities were utilised at a greater rate than in 2009 as a result of the higher number of current accounts. The number of overdrafts remained stable relative to the increased number of accounts. The overdraft facilities granted increased during the year from 474m to 516m. At the end of the year, the volume of overdrafts utilised was 27.3m (end of 2009: 24.7m). In total, receivables in retail lending amounted (excluding ebase) to 197.9m (previous year: 178.9m) as of 31 December 2010. Once again, there was no need to recognise specific loan loss provisions. At the end of the reporting year, portfolio loan loss provisions amounted to 1.7m. Allocations stood at 1.5m, while reversals totalled 1.8m and utilisation was 0.2m, resulting in a total decrease in provisions for possible loan losses from 2.2m to 1.7m (see note (28) on page 88 and note (39) on page 93). Liquidity risk Risk management, quantification and reporting At comdirect bank, Treasury is responsible for managing liquidity. In order to cover a possible removal of liquidity by customers, the bank maintains a sufficient volume of funds due at call as well as highly liquid securities, which can be used as collateral to obtain liquidity. To limit the liquidity risk, we are also guided by the requirements of the Liquidity Regulation as well as internal management indicators. In addition to the required regulatory indicators, the liquidity risk is also managed using a limit system based on the available net liquidity concept. The future funding requirement is calculated using the available liquidity in the future supplemented by the expected liquidity impact of decisions related to business policy and customer conduct. The available net liquidity is determined and monitored for both a basic scenario, allowing for normal market conditions, and for stress scenarios. Current risk situation The comdirect group s liquidity situation in the reporting year was again dominated by a high level of surplus liquidity. The accumulated available net liquidity consistently exceeded the defined minimum values. In the basic scenario, the net liquidity amounted to 3,075m as of 31 December 2010 and to 2,780m on average for the year. In the stress scenario, the net liquidity totalled 1,623m as of the reporting date and 1,284m on average for the year; in this scenario, we simulate an abrupt and massive outflow of customer deposits as well as a sharp rise in the utilisation of open credit lines. The increase in available net liquidity by comparison with the respective figures for the previous year relates primarily to growth in customer deposits. The regulatory liquidity indicator stood at 5.51 on average and was considerably higher than the minimum value of 1 required by the regulatory authorities. The liquidity indicator is calculated by comparing short-term cash and cash equivalents and payment obligations with a maturity of up to one year.
60 Operational risk Risk management, quantification and reporting Operational risks vary in line with the underlying business activities and are generally function-dependent. They are therefore managed on a decentralised basis. The regular self-assessments are one instrument used to measure operational risk. All operational risks are continually monitored and loss incidents have to be reported immediately. The risks are valued and aggregated centrally by Risk Controlling to form the VaR indicator for operational risks. Apart from the physical infrastructure (especially hardware), the system architecture (for example multi-tier server structure and software) is of special importance for the comdirect group. In general, both have built-in redundancy or have a modular structure in order to guarantee a constantly high level of availability for all the required systems and components. As part of business contingency planning for IT, external providers and their business contingency plans are also taken into consideration. In this connection, comdirect group has formulated requirements with regard to availability and used them to check the business contingency measures of key service providers. Organisational and technical measures serve to prevent or limit loss for all areas of operational risk. Organisational instructions, staff training, IT project and quality management as well as business continuity management should all be mentioned in this context. These risk mitigation measures are documented in comdirect group s risk manual. Personnel risks are countered by implementing suitable measures to strengthen employee loyalty and provide professional development programmes (see personnel report on pages 51 to 52). The Legal & Compliance department at comdirect bank is responsible for preparing the company in advance for any legal changes. The department carefully follows relevant developments and if necessary, identifies any impact they may have and promptly informs the divisions concerned. comdirect bank AG s sources of information include the bank s membership in the Association of German Banks (Bundesverband deutscher Banken e. V.), its general circulars and membership in the working group for direct banks, reports in trade magazines as well as its cooperation with the Group Legal department of Commerzbank AG. Potential liability risks in financial advisory services are minimised through the documentation of advisory meetings and contractual regulations. Insurance is also used on a targeted basis as an additional measure for minimising damages. Furthermore, the insurability of risks is regularly reviewed and rated economically. Current risk situation After 49.3m at year-end 2009, the OpVaR stood at 46.1m as of 31 December 2010. By switching to credit cards with an EMV chip and using the Verified by Visa authentication procedure introduced in the spring, as well as other fraud prevention measures, the B2C business line succeeded in stabilising the number of credit card misuse cases over the course of the year. There were no material personnel risks or legal risks. The same applies for IT risks: the systems and technical processes used by comdirect were once again very stable. As in the previous year, system availability averaged 99.9% for the year. Business risk Risk management, quantification and reporting To manage business risks, we primarily assess aspects of corporate planning, the intensity of competition, product development and as material influences on the core business of the comdirect group the number of trades as well as interest rates. The net operating profit (NOP) is used to assess the planning variances in past business periods. The VaR of the business risk is determined using a model which illustrates the variances between planned and generated NOP. Strategic decisions regarding the further development of the business model are made on the basis of extensive analysis by the Board of Managing Directors with approval of the Supervisory Board. Current risk situation The rise in the VaR from 18.1m at the end of 2009 to the present level of 26.7m results from the general planning uncertainty in the current interest rate and capital market environment.
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 61 Developments since the 2010 reporting date Risk-bearing capacity calculation As part of the further development of its ICAAP, comdirect created the preconditions for extending its risk-bearing capacity concept during the reporting year. As of the start of financial year 2011, model risks (close-out risks) will be included in the risk-bearing capacity assessment. These model risks stem from possible variances in interest rate adjustment behaviour or a stronger outflow of customer deposits than forecast in the deposit modelling. Here, we distinguish between loss and refinancing risks. Loss risks from a potentially stronger outflow of deposits than forecast in the model can arise as a result of temporary losses in market value caused by interest rate increases and/or spread widening. Basel III and the comdirect bank AG Based on the experience of the financial market and economic crisis, the Basel Committee for Banking Supervision (BCBS) adopted new standards for capital requirements, the leverage ratio and the liquidity management of financial institutions in 2010. These are set to be implemented at European and national level in the short term and their gradual application is mandatory as of 2013. The requirements with respect to the level and quality of capital requirements are being structurally increased. With an unchanged minimum capital backing of 8%, the core capital ratio is to be raised from 4% to 6% between 2013 and 2015. In the future, instead of the previous 50%, 75% of the total capital ratio must therefore be represented by regulatory core capital (tier 1). In turn, 75% of this (and no longer 50% as under Basel II) is attributable to hard core capital (share capital, capital reserve and retained earnings). In addition, by the end of 2018, a capital preservation buffer of 2.5% must be set aside so that the total capital ratio then rises to 10.5%. The regulations do not have any material impact on the comdirect group, as the capital requirements specified under banking supervision regulations are presently already fulfilled exclusively via tier 1 capital and the long-term minimum backing is already guaranteed. Two new key indicators serve to implement the higher liquidity standards. The liquidity coverage ratio (LCR) is aimed at ensuring that the highly liquid liquidity reserve in the stress scenario can compensate for a massive funds outflow for 30 days. The net stable funding ratio (NSFR) serves to guarantee sound refinancing in the long term. Since the internal procedures for measuring and managing comdirect s liquidity risk already largely take account of the new liquidity requirements, both key ratios, which are expected to be introduced at the start of 2015 (LCR) and start of 2018 (NSFR), are now already integrated into the internal risk reporting system and are definitely complied with. According to the current discussion on the subject, the leverage ratio stipulates that the ratio of tier 1 capital to total lending (nonrisk weighted assets) must amount to at least 3%. This regulation is of greater relevance for comdirect as it limits the volume of deposit business and associated Treasury portfolio in the future or necessitates higher capital requirements. The equity in the amount of 366m reported at the end of 2010 in the individual financial statement of comdirect bank AG, prepared in accordance with the German Commercial Code (HGB), yields a maximum volume of unweighted assets totalling 12bn; total lending as of 31 December 2010 amounted to 89% of the maximum value. Following a five-year monitoring phase, the leverage ratio is expected to become compulsory starting at the beginning of 2018.
62 > Opportunity report Overall bank strategy and opportunity management In addition to risks, we also regularly monitor opportunities as part of the overall strategy of the comdirect group. Within the scope of this strategy, the comdirect bank AG Board of Managing Directors decides the extent to which the bank is willing to take risks in order to leverage opportunities for growth or profit. Information on market and product opportunities is primarily acquired through regular and in-depth analysis of political, legal and regulatory framework parameters, the economic environment and competitive situation in the German banking market, especially in the direct banking sector, and systematic analysis of customer behaviour and satisfaction, through regular customer surveys and customer satisfaction studies conducted by independent market research organisations as well as the continuous evaluation of customer feedback provided to Customer Services or in forum discussions. In addition, the development of the key non-financial performance indicators included in the overall bank management can provide insight into the future structure of the market and product initiatives. Efficiency improvements provide another opportunity for potential added value. On the whole, the methods and processes established enable the comdirect group to identify opportunities at an early stage and then assess and consistently utilise them. Categorisation of opportunities We continue to distinguish between three types of opportunities. Opportunities arising from developments in framework parameters refer to potential added value stemming from favourable market developments, amendments to legislation as well as industry and customer behaviour trends. Strategic opportunities arise from the targeted use of company resources and from implementing overriding strategies, such as the complus growth programme. Performance opportunities are closely linked to the business activities of the comdirect group. These include efficiency improvements as well as potential for added value within the customer-bank relationship. Current opportunities With our direct banking business model based on brokerage, banking and advice, we are well placed to benefit from the favourable long-term trends in the industry: In 2010, 10% of annual private financial asset accumulation transactions were made over the internet and according to market studies, this share is set to rise by one third by 2015. At the same time, the proportion of new investments made via the internet is expected to increase from the current figure of 17% to around 27%. The number of customers using online banking has been rising continually for many years, and market forecasts indicate it will continue to do so in the future. In the reporting year, around 30m consumers used online banking and the number is set to grow to 35m by 2015. According to studies, the number of direct bank customers is forecast to increase by a further 3m, to 17.5m, by 2015. At the same time, the number of customers executing their banking transactions exclusively via a direct bank is growing. Product choice and the improved functionalities offered by direct banks are rendering the products and services of branch banks unnecessary for many banking customers.
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 63 The greatest potential for direct banks lies in the customer base of the branch banks. At present, direct banks account for only around 10% of the total deposits of private households in Germany, amounting to around 1.5tn. The picture for portfolio assets is similar. The number of investors trading securities on the stock exchange or OTC via a direct bank is also rising despite a long-term decline in the number of shareholders and fund investors. There is still a great need for private provisioning. 81% of Germans already have a funded old-age provisioning product or intend to take out such a policy. In the reporting period, around one million new Riester pension policies were taken out in Germany. In total, around 15m Germans are using state-subsidised Riester pensions. We also see positive long-term industry trends in the B2B business line. We are convinced that integrated brokerage and banking platforms, such as ebase, can best meet the requirements of insurance companies, financial intermediaries, asset managers and investment companies with regard to tailored solutions for custody accounts and other accounts. Market opportunities could also arise in the short to medium term. Consequently, the comdirect group will achieve higher net commission income if there is a favourable change in the trading environment. If market interest rates increase earlier than expected, this development will have a positive impact on net interest income. Opportunities can also arise from amendments to legislation or current jurisprudence. For example, court rulings related to the recognition of write-downs to the going concern value of foreign equity investments are relevant here. The strategic opportunities for the company result primarily from the consistent implementation of complus in the B2C business line and various measures in the B2B business line. By successively extending the range of products and services we intend to be the first choice direct bank for more and more private investors and institutional partners. Performance opportunities relate to the continued measures to improve efficiency in both business lines. The comdirect group invests in the ongoing modernisation of its technical systems and in an even more efficient and flexible infrastructure, implementing international best practice approaches as we do so. In addition, staff members submit individual initiatives as part of their active participation in the continuous improvement process and our employee suggestion scheme. Detailed information on this can be found in the section on our value-driven strategy, on pages 24 to 27.
64 > Outlook The comdirect group has consistently implemented its strategic and operating goals in financial year 2010. The range of products and services was expanded and aligned more closely with the central requirements of private customers and institutional partners. At the same time, through successful restructuring mea sures and increased efficiency, we have enhanced our perfor mance and improved our competitive position in the B2C and B2B direct banking market. In both business lines, our strategic focus continues to be on profitable growth. In the financial years to come, we aim to raise both the number of customers and assets under custody. The goal is to increase the number of customers to 3m and assets under custody to 50bn by the end of 2013. Forward-looking statements We forecast future developments in the economy based on assumptions that are the most probable from today s perspective. However, the bank s planning and all statements regarding future development are of course associated with uncertainty, especially in the current market situation. The actual development of the market environment or the bank can vary from the assumed trends. Future strategy and organisational alignment We will continue our present strategy in both business lines. In the B2C business line, our activities will continue to centre on the targets and areas for action under the complus programme. In the B2B business line, the future focus will continue to be on intensive market cultivation in the main customer segments as well as expanding the product range and extending the offering of partnerspecific services. For details on our individual elements of our strategy for value-oriented growth, please see pages 24 to 27. There are no plans for major adjustments to the organisation and structure of the company (see pages 21 to 23). Expected economic framework parameters According to the forecasts, the growth rate for the global economy in 2011 will be similar to that in the reporting year. Nevertheless there are considerable growth risks: stabilisation of the financial markets is not yet complete, the real estate markets in the USA and many other countries remain problematic, the sovereign debt crisis in the eurozone is impairing the stability of the common currency and the strong growth in Asia harbours risks of inflation and overheating. Within the eurozone, Germany, with its strong focus on exports, is likely to record particularly strong growth again in 2011, although the rise in GDP is expected to be lower than in 2010. In view of the continued economic recovery and the rising inflation expectations at present, it seems apparent that the ECB will further reduce the surplus liquidity in the European money market, which would lead to an accelerated rise in money market interest rates. Based on the current economic forecasts, we expect that the key lending rate in the eurozone will be raised in the second half of the 2011. The first weeks of 2011 have already shown a slight increase in money market interest rates, and current market developments and interest rate forecasts point to a significant upward trend starting in the third quarter of 2011. In the medium term, we expect to see a substantially higher interest rate level again. At the start of 2011, credit spreads were still high on government bonds and bank bonds from debt-stricken eurozone countries; however, the euro rescue package could gradually ease the situation here. In such a scenario, investors are likely to turn increasingly towards riskier investments. Provided that economic development is stable and company figures are positive, the equity markets could also benefit from a greater appetite for risk on the part of investors and private investors. Many market observers currently expect a considerable rise in the DAX in 2011. Expected business development and competitive position If share prices continue to increase, we presume that the trading volume on the stock exchanges will at least reach the level of 2010. Moreover, in light of the anticipated rising market interest rates, we expect the margin in the deposit business to improve. In both business lines, comdirect is well-positioned to benefit from these developments and drive forward growth. In the B2C business line, our current account with satisfaction guarantee remains the focus of product advertising. We will further enhance the account with additional functions and thus win over more new customers. In brokerage, we plan to substantially expand the range of products for traders during the year, including through limit functions for OTC trading and by extending the investment universe to CFDs. We will continue the successful low price campaigns for fund investors and securities savers; in the new year, we have built on the campaign of 2010 with a flat-fee campaign featuring attractive terms and conditions and an increased number of partners. In advice, among other things, the
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 65 aim is to market the Baufinanzierung PLUS offering even more intensively, initially with a focus on comdirect bank s existing customer base. In the B2B business line, there are good opportunities for us to attract additional institutional partners, especially with our white label products based on the revised architecture for custody accounts and other accounts. We see particularly great potential in the insurance market, where we are also attracting major interest with our solutions for the funds received upon the maturity of life assurance policies. By implementing a new and attractive price model for ETFs, we also aim to acquire more intermediaries for this asset class and increase the number of providers. The prerequisite for achieving this propelled growth beyond our present core business is the steps we are taking to further develop the technology for our custody accounts and other accounts. Overall, we expect the number of customers and the portfolio and deposit volumes to rise in both business lines. Through this, we intend to consolidate and expand our market position (see page 33). Expected earnings situation We have satisfied all of the corporate and strategic requirements for achieving a good pre-tax result in financial year 2011. Providing that our assumptions regarding market development prove to be correct, the plan is to increase our total income. We expect a margin and volume-related rise in net interest income. Net commission income is heavily dependent on the trading environment, and developments there are associated with great uncertainty, even if the DAX rises as forecast. On the other hand, considerable price gains would lead to more portfolio assets in investment funds, resulting in higher sales follow-up commission. The contribution to net commission income made by payment transactions and the advisory fields will increase as expected, although it will still be low as compared with the securities business. Expected financial situation and assets We are continuing to pursue our Treasury strategy (see page 45). The liquidity situation of the comdirect group will remain dominated in the future by customer deposits and the reinvestment of those funds. As a result of the liquidity surplus in the comdirect group s specific business model, there is no need to raise additional liquidity. The reinvestment of customer funds will be carried out primarily within the Commerzbank Group, in particular via promissory notes. For 2011, we are once again planning focused investments in infrastructure and further development of individual products. There are no material financial obligations under current investment projects. Personnel The number of employees is scheduled to increase slightly in financial year 2011. As a result of growth, additional positions will be created in Customer Services in the B2C business line in particular. We expect the number of employees at ebase to decrease slightly. We intend to complete the further development of our performance-related compensation system by the end of 2011. Another key HR project in 2011 will be the targeted promotion of female junior managers. In addition, we will be offering a new executive and manager development programme in 2011. Risk position There are currently no foreseeable developments or events that could materially change the risk position of the comdirect group as compared to the situation outlined in financial year 2010. On the basis of the current market developments and brightening interest rate forecasts, comdirect has created all of the prerequisites needed to realise a result in financial year 2011 that is on par with the level of 2010 and to exceed it in financial year 2012. We also intend to continue our profitable growth beyond 2012. If the markets develop as outlined above, and particularly if interest rates rise in line with current forecasts, we believe we can meet our long-term goal, set in 2009, to achieve a pre-tax result of between 150m and 170m in 2013.
66 > Supplementary report No major events or developments of special significance have occurred since the 2010 reporting date. > Details in accordance with Sections 289, 315 of the German Commercial Code (HGB) and explanatory report of the Board of Managing Directors of comdirect bank Details in accordance with Sections 289 (4) and 315 (4) of the German Commercial Code (HGB) and explanatory report of the Board of Managing Directors of comdirect bank Aktiengesellschaft The details in the management report/group management report of comdirect bank AG in accordance with Sections 289 (4) and 315 (4) of the German Commercial Code (HGB), should provide third parties potentially interested in a takeover of comdirect bank AG with the information on the company relevant for a takeover. This refers to the following information: Composition of the subscribed capital; Restrictions affecting voting rights or the transfer of shares; Direct or indirect holdings exceeding 10% of the voting rights; Holders of shares with special rights, which grant controlling powers; Type of voting rights control if employees participate in the capital and do not exercise their controlling rights directly; Legal regulations and provisions in the Articles of Association on the appointment and removal of members of the Board of Managing Directors and amendment of the Articles of Association; Powers of the Board of Managing Directors, especially regarding the issue or buyback of shares; Material agreements which would come into effect in the event of a change of control as a result of a takeover bid; Compensation agreements concluded with members of the Board of Managing Directors or employees in the event of a takeover bid. Composition of the subscribed capital As of the end of the financial year, the subscribed capital of the company amounts to 141,220,815.00. It is divided into 141,220,815 no-par value shares. The rights and obligations associated with these ordinary shares arise in particular from Sections 12, 53a ff, 118 ff, 186 of the German Stock Corporation Act (AktG). The shares are bearer shares. Restrictions affecting voting rights or the transfer of shares There are no known restrictions relating to voting rights or the transfer of shares. Direct or indirect holdings above 10% of the voting rights Commerzbank Inlandsbanken Holding GmbH, Frankfurt/Main, which is a wholly-owned subsidiary of Commerzbank AG, Frankfurt/Main, in turn holds 80.53% of the capital of comdirect bank AG. There are no other direct or indirect shareholdings which exceed 10% of the voting rights. Holders of shares with special rights, which grant controlling powers There are no holders of shares with special rights conferring controlling powers. In particular, there are no rights to appoint members of the Supervisory Board pursuant to Section 101 (2) of the German Stock Corporation Act (AktG). Type of voting rights control if employees participate in the capital and do not exercise their controlling rights directly Where employees of comdirect bank AG hold interests in the capital of the company, they exercise their controlling rights through their voting rights directly.
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 67 Appointment and removal of members of the Board of Managing Directors/amendments to the Articles of Association The members of the Board of Managing Directors are appointed and removed by the Supervisory Board in line with the provisions of Section 84 of the German Stock Corporation Act (AktG) and Article 6 (2) of the Articles of Association. If the Board of Managing Directors is missing a required member and the Supervisory Board has not made an appointment accordingly, one is appointed in urgent cases by the court in line with Section 85 of the German Stock Corporation Act (AktG). Any change to the Articles of Association requires a resolution by the annual general meeting in line with Section 179 (1) of the German Stock Corporation Act (AktG). Unless a greater majority is required by law, a simple majority of the capital represented is sufficient (Article 20 clause 2 of the Articles of Association). The authority to amend the version of the Articles of Association has been assigned to the Supervisory Board according to Article 8 (2) of the Articles of Association in compliance with Section 179 (1) clause 2 of the German Stock Corporation Act (AktG). Powers of Board of Managing Directors to issue or buyback shares In accordance with the further details of the resolutions adopted by the annual general meeting on 7 May 2010, the company is authorised to acquire its own shares pursuant to Section 71 (1) Nos. 7 and 8 of the German Stock Corporation Act (AktG). The company has not made any use of this authorisation. New shares may be issued, particularly as part of the authorisations pursuant to Article 4 (3 and 4) of the Articles of Association (Authorised and conditional capital). The company has not made any use of this authorisation either. Material agreements which would come into effect in the event of a change of control as a result of a takeover bid There are no material agreements between comdirect bank AG and third parties which would come into effect, change or end in the event of a change of control as a result of a takeover bid. Compensation agreements concluded with members of the Board of Managing Directors or employees in the event of a takeover bid comdirect bank AG has not concluded any compensation agreements with members of the Board of Managing Directors or employees in the event of takeover bid. Details in accordance with Sections 289 (5) and 315 (2) No. 5 of the German Commercial Code (HGB) and explanatory report of the Board of Managing Directors of comdirect bank Aktiengesellschaft Details and explanations relating to the accounting-related internal control and risk management system The aim of the internal control system (ICS) and the risk management system of comdirect bank with regard to the accounting process is to ensure the reliability of the reporting and the annual and quarterly financial statements in line with generally accepted accounting principles. This goal is achieved by anchoring ICS groupwide in the organisational structure and through the different components of the system. Organisation The internal control and risk management system in relation to the accounting process is part of the remit of the Chief Financial Officer (CFO). Within the Management Board division, the Finance, Controlling & Risk Management department is responsible for financial reporting in accordance with legal regulations and internal and external guidelines. Within the department, the Finance unit is responsible for external financial reporting and calculation of current and deferred taxes, while internal reporting is the responsibility of Controlling. The Risk Monitoring department is responsible throughout the bank for identifying, measuring, managing, monitoring and communicating risks, and the Credit Risk Management department handles the management of the retail credit risk. Furthermore, Compliance and Internal Audit report directly to the CFO. Pooling these departments in one Management Board division facilitates the efficient management and control of group accounting. The Supervisory Board monitors the accounting process primarily via the Audit Committee, which is responsible in particular for questions regarding accounting, ensuring the required independence of the auditors, granting the audit contract to the auditors, determining the focal points of the audit and the agreed-upon fee arrangement. The Audit Committee also monitors Compliance. The Rules of Procedure for the Supervisory Board stipulate that the Chairman of the Audit Committee must have particular expertise and experience in the application of accounting principles and internal control procedures. Control functions related to financial reporting are assumed by the Board of Managing Directors and the Supervisory Board on one hand and by various bodies within Finance on the other. On behalf of the Board of Managing Directors, Internal Audit provides independent, objective and risk-oriented auditing and advisory services aimed at optimising the business processes of the
68 comdirect group in terms of correctness, security and cost-effectiveness. Internal Audit supports the Board of Managing Directors by systematically assessing the effectiveness and appropriateness of the Internal Control System (ICS) and business processes on a targeted basis, providing auditing support for key projects and making recommendations. This helps safeguard business processes and assets. Internal Audit reports directly to the Board of Managing Directors. It carries out its tasks autonomously and independently. The reporting and evaluation of the audit findings are not bound by any instructions. In line with the minimum requirements for risk management (MaRisk), the Chairman of the Audit Committee of the Supervisory Board can obtain information directly from the Head of Internal Audit. The Internal Audit department of comdirect reports directly to the comdirect Board of Managing Directors and the Board is responsible for its management. Information is frequently exchanged between the Internal Audit department of comdirect and Group Audit of Commerzbank with regular reporting also taking place. The IT systems are also a key component in the annual accounts process and must therefore comply with the requirements of the internal control and risk management system. Various software systems are used in the comdirect group to prepare the financial statements and comdirect makes extensive use of the Commerzbank systems. comdirect uses the Internal Audit department at Commerzbank to monitor and audit the systems used. Furthermore, comdirect receives the extracts from the report of the auditors of Commerzbank on an annual basis. In addition to standard software, programmes that are specially configured for the requirements of the bank are also used for accounting purposes. All programmes are subject to numerous plausibility checks, which are an integral part of the system landscape used in accounting. All the systems used in the Finance unit are protected by an effective access authorisation concept. The entire accounting process and all instructions are documented. The system described here is reviewed annually and updated, in particular to reflect changes in the law, directives and accounting standards. comdirect is solely responsible for preparing the accounts and, particularly through its qualified personnel, possesses the required expertise. Components Clear and binding accounting standards are in place within the comdirect group, which comply with legal regulations and the accounting standards of Commerzbank, the ultimate parent company. They are subject to auditing by the auditors and are continually reviewed with regard to the need for updating and adjusted if required. In addition to the accounting guidelines, various organisational measures contribute to reliable reporting. Consequently, there are clear lines of authority at comdirect, which ensure the allocation of specialist task areas and responsibilities. Decisions are made exclusively in accordance with the allocated authorities. These regulations make a significant contribution to facilitating proper accounting at all times. A further fundamental element ensuring correct accounting is the principle of dual control, whereby critical actions must always be checked by another person. Furthermore, the Finance unit is structured in line with the segregation of duties principle, under which incompatible activities are kept separate from each other in terms of organisation and are processed separately to avoid conflicts of interest.
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 69 > Declaration of the Board of Managing Directors on Section 312 of the German Stock Corporation Act (AktG) As a result of the integration of comdirect bank AG including its subsidiaries in the Commerzbank Group, the Board of Managing Directors is oblidged to prepare a dependency report in accordance with Section 312 of the German Stock Corporation Act (AktG). Under the circumstances known to us at the date on which the company concluded legal transactions and carried out or omitted measures, comdirect bank AG received adequate consideration for each such transaction and suffered no disadvantage from measures either being carried out or not carried out. No measures which must be reported were carried out or not carried out.
Georg Burkhardt The new product architecture linking custody account management and account administration was a major step for ebase, but represents just the first on the path to becoming the leading B2B direct bank, says Georg Burkhardt, Divisional Manager IT. The vision: to create networked structures so that partners can offer intelligent bank services and seamlessly integrate them into their offering.
The B2B direct bank ebase is taking shape: the custody account specialist has evolved to become an integrated provider of specific brokerage and banking solutions for institutional partners. ebase s partners are able to offer their customers attractive investment opportunities in every market situation and in this way, comprehensively manage these assets. Market data for 2010 shows that investment behaviour has changed over the past few years, in part due to the financial market crisis. As a result of the pronounced risk aversion on the part of investors, fund inflows in investment funds were limited and according to the initial information from the industry, new business in life assurance and pensions was comparatively restrained. Instead risk-free interest-bearing investments such as call money and fixed-term deposits were in demand, as were listed index funds for investors wanting to participate in stock exchange movements. The challenges faced by ebase s institutional partners were not made any easier by market developments and legal requirements. Whether an insurance company, independent financial adviser (IFA), asset manager or investment company (KAG): all of them are seeking additional options to revitalise new business and offer customers worthwhile long-term investment opportunities. And alternatives to the traditional funds business are also being developed in con junction with this. ebase recognised the sign of the times at an early stage and supplemented its successful business activities with actively managed investment funds on a targeted basis both through B2B-type banking solutions and a sustainable model for the inclusion of ETFs in the product portfolios of intermediaries and advisers. We help our partners attract and retain customer funds in their management cycle, says Rudolf Geyer, Management Spokesman at ebase. Particularly when investors are holding back on securities investments and parking their money in deposit accounts. New custody account model for all market situations The deposit business has reached a respectable size within a very short period of time. The number of accounts climbed to around 54 thousand, corresponding to already 13.4% of the end customer custody accounts with an additional account agreement compared with just 2.5% a year earlier. The key measure here was the change in the architecture for custody accounts. The ebase Depot flex custody account, available since the beginning of 2010, links the established Depot custody account with a settlement account; partners can execute fund transactions directly via this account. And for customers looking to invest funds that become available at attractive interest rates, a call
money account, or the fixed-term deposit account available since the beginning of 2010, can easily be coupled with the new custody account model. The B2B direct bank is really taking shape with this product family, says Georg Burkhardt, Divisional Manager IT. Whatever the end customers decide they can implement all the main investment decisions within our partners advisory services cycle. This is even more true, as the sales partners now have access to a wide range of ETFs for their customers an ideal complement to active asset management. In the third quarter, ebase also acquired two leading providers of ETFs in addition to ComStage: db x-trackers and Lyxor. The prices here are set directly via the market maker of the investment companies, so there are no stock exchange fees. A further advantage: ebase can settle the transactions at daily fund prices in direct contact with the ETF providers and the end customer disposes over the actual settled asset value. This also makes inclusion in existing business with investment funds easier, since the procedure is similar. And because index funds tend to represent low-commission products for intermediaries, ebase developed the right fee model at the same time. Volume-related service fees could soon replace the traditional model based on front-end loads. ETF savings plans can also be concluded. In the third quarter, they won an award for the widest choice and greatest flexibility in a comparison test conducted by investment magazine Focus Money. ebase The European Bank for Fund Services GmbH (ebase ), wholly-owned subsidiary of comdirect bank AG, is positioned as a B2B direct bank offering custody account and account solutions. The expanded range of products and services creates B2B specific solutions for asset accumulation and investments. ebase is a full-service partner for financial intermediaries, insurance companies, asset managers and investment companies and represents the B2B business of the comdirect group. More than 56,000 intermediaries use ebase as a partner for their customers investment custody accounts and accounts management. Asset accumulation by choice The potential offered by the dual combination of account and custody account is demonstrated not least by the high level of interest shown by insurance companies in partner-specific solutions usually with the look and feel of the respective company, delivered on a turnkey basis by white label specialist ebase. Interest here centres on the reinvestment of funds received on the maturity of life assurance policies. There is a great need for action: every year considerably more than 50bn is paid out, yet the reinvestment rate throughout the industry is less than 10%. Through ebase s follow-on products an interest-bearing call money or fixed-term deposit account, which, if the customer desires, can be combined with the right fund portfolio for asset accumulation a substantially larger share of these funds remain with the respective insurance company. Naturally, the priority is to steer funds from maturing insurance policies towards a suitable destination, says Geyer. But together with our partners, we also plan for the long term. For example, the idea that when customers take out the insurance policy, they can already open a virtual account into which the funds are automatically paid on maturity. Focus on further development The custody account and account architecture forms a good basis for expansion of the business in line with the needs of partners and end customers. ebase is focusing on the one hand on the further development of the product portfolio: going forward, new customer groups can be gained through additional account functions right up to payment transactions as well as a custody account with innovative functionalities and an expanded securities universe. On the other, the aim is to embed the offering seamlessly in the application landscape of the partners, ideally through white label solutions. While partner-specific configurations are still executed via conventional interfaces at present, Burkhardt believes the future belongs to network bank services. Through intelligent networking with ebase, our partners will be able to carry out banking without actually being a bank, explains the IT specialist. With such virtual solutions, in the future end customers will have considerably more options for the execution of financial investments and payment transactions outside the traditional banking sector.
70 > Consolidated financial statements Income statement 72 Statement of comprehensive income 72 Balance sheet 73 Statement of changes in equity 74 Cash flow statement 75 Notes 76 Basis of accounting principles 76 Accounting and measurement methods 76 (1) Basic principles 76 (2) IAS/IFRS and SIC/IFRIC rules applied for the first time and to be applied in the future 77 (3) Consolidated companies 77 (4) Principles of consolidation 78 (5) Hedge Accounting 78 (6) Cash reserve 78 (7) Claims 78 (8) Currency translation 78 (9) Provisions for possible loan losses 78 (10) Positive fair values from derivative hedging instruments 79 (11) Trading assets 79 (12) Financial investments 79 (13) Intangible assets 80 (14) Fixed assets 80 (15) Leases 81 (16) Liabilities 81 (17) Negative fair values from derivative hedging instruments 81 (18) Trading liabilities 81 (19) Provisions 81 (20) Income taxes 83 (21) Conditional and authorised capital 83 (22) Earnings 83 (23) Appropriation of profits 84 (24) Earnings per share 84 (25) Performance share plan (share-based compensation) 84 (26) Related party disclosures 85 Notes to the income statement 88 (27) Net interest income before provisions 88 (28) Provisions for possible loan losses 88 (29) Net commission income 88 (30) Result from hedge accounting 89 (31) Trading result 89 (32) Result from financial investments 89 (33) Administrative expenses 89 (34) Other operating result 90 (35) Taxes on income 91 Notes to the balance sheet 92 (36) Cash reserve 92 (37) Claims on banks 92
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 71 (38) Claims on customers 92 (39) Provisions for possible loan losses 93 (40) Financial investments 93 (41) Intangible assets 94 (42) Fixed assets 94 (43) Schedule of assets 95 (44) Income tax assets 96 (45) Other assets 96 (46) Liabilities to banks 97 (47) Liabilities to customers 97 (48) Negative fair values from derivative hedging instruments 97 (49) Provisions 98 (50) Income tax liabilities 101 (51) Other liabilities 102 (52) Equity 102 Additional information 104 (53) Equity management 104 (54) Maturities, by remaining lifetime 105 (55) Claims on/liabilities to affiliated companies 106 (56) Risk reporting on financial instruments 106 (57) Fair Value of financial instruments 111 (58) Fair Value hierarchy 112 (59) Net result from financial instruments 113 (60) Average number of employees during the reporting period 114 (61) Income statement of comdirect group according to IAS/IFRS year-to-year comparison 115 (62) Income statement of comdirect group according to IAS/IFRS on a quarterly comparison 116 (63) Segment reporting by business line 118 (64) Other liabilities 121 (65) Fees for auditors 121 (66) Corporate Governance Code 121 (67) The company s Boards 122 (68) Seats on supervisory boards and other executive bodies 123 (69) Remuneration and loans to Board members 124 (70) Holdings 127
72 > Income statement Income statement of comdirect group according to IAS/IFRS 1.1. to 31.12. thousand Notes 2010 2009 Interest income 211,280 265,865 Interest expenses 109,206 157,172 Net interest income before provisions (27) 102,074 108,693 Provisions for possible loan losses (9) (28) 255 1,299 Net interest income after provisions 101,819 109,992 Commission income 281,227 248,539 Commission expenses 108,455 99,782 Net commission income (29) 172,772 148,757 Result from hedge accounting (5) (30) 22 0 Trading result (31) 0 836 Result from financial investments (32) 9,919 20,850 Administrative expenses (33) 210,028 198,918 Other operating result (34) 6,414 3,421 Operating result 80,874 84,938 Restructuring expenses 0 8,945 Pre-tax profit/profit from ordinary activities 80,874 75,993 Taxes on income (20) (35) 21,240 19,369 Net profit 59,634 56,624 Allocation to reserves 321 0 Transfer from reserves 0 1,277 Consolidated profit (23) 59,313 57,901 Undiluted/diluted earnings per share 1.1. to 31.12. 2010 2009 Net profit thousand 59,634 56,624 Average number of ordinary shares shares 141,220,815 141,220,815 Undiluted/diluted earnings per share 0.42 0.40 No shares were issued during the financial year, so that the average number of ordinary shares corresponded to the number of ordinary shares in circulation as of 31.12.2010. > Statement of comprehensive income Statement of comprehensive income of comdirect group according to IAS/IFRS 1.1. to 31.12. thousand 2010 2009 Net profit 59,634 56,624 Changes in the revaluation reserve before tax 28,583 83,280 Taxes 7,708 21,659 Changes in the revaluation reserve after tax 20,875 61,621 Comprehensive income/loss for the reporting period 38,759 118,245 Net profit and comprehensive income/loss for the reporting period are attributable in full to the shareholders of comdirect bank AG.
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 73 > Balance sheet Balance sheet of comdirect group according to IAS/IFRS Assets thousand Notes as of 31.12.2010 as of 31.12.2009 Cash reserve (6) (36) 184,967 282,827 Claims on banks (7) (37) 5,894,275 4,761,021 Claims on customers (7) (38) 237,538 206,199 Provisions for possible loan losses (9) (39) 1,680 2,160 Financial investments (12) (40) 4,670,995 4,478,973 Intangible assets (13) (41) (43) 29,834 30,241 Fixed assets (14) (42) (43) 12,880 17,553 Current income tax assets (20) (44) 4,103 3,774 Other assets (45) 7,248 6,803 Total assets 11,040,160 9,785,231 Liabilities and equity thousand Notes as of 31.12.2010 as of 31.12.2009 Liabilities to banks (46) 40,779 923 Liabilities to customers (16) (47) 10,368,068 9,124,792 Negative fair values from derivative hedging instruments (5) (17) (48) 38 0 Provisions (19) (49) 43,965 49,567 Current income tax liabilities (20) (50) 4,521 14,772 Deferred income tax liabilities (20) (50) 14,798 18,898 Other liabilities (51) 53,773 42,919 Equity (52) 514,218 533,360 Subscribed capital 141,221 141,221 Capital reserve 223,296 223,296 Retained earnings 59,671 59,350 Revaluation reserves 30,717 51,592 Consolidated profit 59,313 57,901 Total liabilities and equity 11,040,160 9,785,231
74 > Statement of changes in equity thousand Subscribed Capital Retained Revaluation Consolidated Total capital reserve earnings reserve 1) profit Equity as of 1.1.2009 141,221 223,296 60,627 10,029 60,341 475,456 Net profit from 1.1. to 31.12.2009 56,624 56,624 Changes in revaluation reserve pursuant to IAS 39 61,621 61,621 Total consolidated profit 2009 61,621 56,624 118,245 Profit distributions 60,341 60,341 Allocation to reserves/transfer from reserves 1,277 1,277 0 Equity as of 31.12.2009/1.1.2010 141,221 223,296 59,350 51,592 57,901 533,360 Net profit from 1.1. to 31.12.2010 59,634 59,634 Changes in revaluation reserve pursuant to IAS 39 20,875 20,875 Total consolidated profit 2010 20,875 59,634 38,759 Profit distributions 57,901 57,901 Allocation to reserves/transfer from reserves 321 321 0 Equity as of 31.12.2010 141,221 223,296 59,671 30,717 59,313 514,218 1) Pursuant to IAS 39 In financial year 2010, dividend payments totalling 57,901 thousand were distributed to shareholders of comdirect bank AG. This equates to a payment of 0.41 per share. In financial year 2010, comdirect bank did not make use of either the existing authorisations of the annual general meeting to purchase own shares for the purpose of securities trading pursuant to Section 71 (1) No. 7 German Stock Corporation Act (AktG) or of the resolutions of the annual general meeting authorising the purchase of own shares pursuant to Section 71 (1) No. 8 German Stock Corporation Act (AktG) for purposes other than securities trading.
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 75 > Cash flow statement thousand 1.1. to 31.12. 2010 2009 Net profit 59,634 56,624 Non-cash items and transfer to cash flow from operating activities contained in net profit Depreciation, loan loss provisions, additions to assets, change in provisions and net changes due to hedge accounting and trading 23,131 38,571 Result from the sale of assets 12,404 26,893 Other adjustments 88,134 74,319 Sub-total 17,773 6,017 Changes in assets and liabilities from operating activities after adjustment for non-cash items Claims on banks 1,121,944 1,828,184 on customers 1,373 21,589 Positive/negative fair values from derivative hedging instruments and trading assets 0 9,463 Securities 212,530 347,239 Other assets from operating activities 2,209 3,116 Liabilities to banks 39,856 51,843 to customers 1,222,682 1,359,043 Other liabilities and equity from operating activities 26,954 34,065 Interest and dividends received 201,530 303,736 Interest paid 88,612 179,148 Income tax payments 28,468 17,866 Cash flow from operating activities 33,049 170,869 Cash inflows from the disposal of fixed assets and intangible assets 2,071 117 Cash outflows for the acquisition of fixed assets and intangible assets 8,981 12,563 Cash flow from investment activities 6,910 12,446 Payments from company acquisitions 0 24,900 Dividend payments 57,901 60,341 Cash flow from financing activities 57,901 85,241 Cash and cash equivalents as of the end of the previous year 282,827 209,646 Cash flow from operating activities 33,049 170,869 Cash flow from investment activities 6,910 12,446 Cash flow from financing activities 57,901 85,241 Cash and cash equivalents as of the end of the period 184,967 282,827 Cash and cash equivalents correspond to the balance sheet item cash reserve and include cash on hand and balances held at central banks.
76 > Notes Basis of accounting principles The consolidated financial statements of comdirect as of 31 December 2010 were prepared in accordance with Section 315a (1) of the German Commercial Code (HGB) and Regulation (EC) 1606/2002 (IAS Regulation) of the European Parliament and of the Council of 19 July 2002 as well as further regulations on the adoption of certain international accounting standards in accordance with the International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS), which were approved and published by the International Accounting Standards Board (IASB). Furthermore, the additional standards to be applied under Section 315a (1) of the German Commercial Code (HGB) were observed. The sub-group financial statements of comdirect bank Aktiengesellschaft, Pascalkehre 15, D-25451 Quickborn, Germany are included in the consolidated financial statements of our ultimate parent company, Commerzbank AG, Frankfurt/Main. The consolidated financial statements of Commerzbank AG as of 31 December 2009 were published in the online Federal Gazette on 16 April 2010. In addition to the consolidated balance sheet, the consolidated income statement and the consolidated statement of comprehensive income, the consolidated financial statements include the statement of changes in equity, the cash flow statement and the notes. The group management report, including the risk report in accordance with Section 315 of the German Commercial Code (HGB), forms part of our present annual report. The consolidated financial statements were approved for publication by the Board of Managing Directors on 18 February 2011. Accounting and measurement methods (1) Basic principles The consolidated financial statements are based on the going concern principle. All the units included in the consolidation prepared their financial statements as of 31 December 2010. Income and expenses are recognised on a pro-rata basis; they are shown for the period to which they may be assigned in economic terms. An asset is recognised in the balance sheet if it is probable that there will be future economic benefits for the company and if the cost of acquisition or manufacture or another value can be reliably measured. A liability is recognised in the balance sheet if it is probable that fulfilment of the current obligation will result in a direct outflow of resources with economic benefits and the amount to be paid can be reliably measured. In principle, assets and liabilities are shown at (amortised) cost of acquisition or manufacture (assets) and the issue amount or amount to be paid (liabilities) respectively. Financial instruments are accounted for and measured using IAS 39 and the different classification and measurement principles specified by this regulation. Derivative hedging instruments are subject to the provisions of hedge accounting.
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 77 Where estimates and assessments are necessary in accounting for assets and liabilities, these are based on past experience and other factors such as forecasts and, from today s viewpoint, the probable expectations and forecasts of future events. Uncertainties pertaining to estimates relate in particular to determining the provisions for possible loan losses, the fair value of financial instruments, pension obligations and provisions for restructuring. (2) IAS/IFRS and SIC/IFRIC rules applied for the first time and to be applied in the future In the consolidated financial statements of comdirect bank, all the standards and interpretations to be compulsorily applied in the EU in financial year 2010 were taken into account. Additional IAS/IFRS to be applied in the future: Standard Title Date of application IAS 32 (supplement) Classification of right issues 1 January 2011 IAS 24 (revised) Related party disclosures 1 January 2011 IAS 12 (revised) Deferred tax: recovery of underlying assets 1 January 2012* IFRS 7 (supplement) Financial instruments: disclosures 1 January 2012* IFRS 9 Financial instruments 1 January 2013* Various Improvements to IFRS (May 2010) 1 January 2011* IFRIC 19 Extinguishing financial liabilities with equity instruments 1 January 2011 IFRIC 14 (supplement) Prepayments as part of a minimum funding requirement 1 January 2011 * The date of application is contingent on the timely endorsement of the standards by the European Commission. The provisions of IFRS 9 Financial instruments are aimed at abolishing and replacing IAS 39. Accordingly the current categorisation of financial assets under IAS 39 is being replaced with a system comprising only two classification categories, fair value and amortised cost. At present, comdirect s financial investments are assigned to the available-for-sale category and measured at fair value on an income-neutral basis. The accounting treatment for financial liabilities is set to remain largely unchanged. If the fair value option is used, changes in fair value due to a change in the bank s own credit risk are no longer reported in the income statement as before, but rather in other comprehensive income, unless such presentation leads to an accounting mismatch. IFRS 9 could result in future changes in the categorisation and measurement of financial investments at comdirect bank. Other new regulations could lead in particular to additional disclosure requirements in the notes. (3) Consolidated companies Apart from the parent company, comdirect bank AG, Quickborn, the consolidated companies consist of ebase GmbH, Ascheim, and five special funds, special purpose entities (SPE) in accordance with IAS 27 in conjunction with SIC-12. The subsidiary of comdirect bank AG, comdirect private finance AG, Quickborn, included in the scope of consolidation of the comdirect group in the previous year, was merged into comdirect bank AG in the reporting period. This was entered in the commercial register on 25 June 2010. The merger had no impact on the earnings situation or assets of the comdirect group.
78 One subsidiary of minor importance for the overview of earnings situation, financial situation and assets of the group was not consolidated but accounted for as a holding under financial investments. In each case, comdirect bank AG holds 100% of the shares in the consolidated group units. (4) Principles of consolidation In the consolidation of the capital accounts, the historical cost of the holding in the subsidiary is set off against the proportion of the subsidiary s equity as part of group equity as of the date of acquisition. Intra-group expenses and income, as well as claims and liabilities, are eliminated as part of the debt and income consolidation. Holdings in subsidiaries that are not included in the consolidation due to their minor importance are shown at historical cost under the financial investment portfolio. (5) Hedge accounting The rules under IAS 39 on hedge accounting apply to derivatives demonstrably used to hedge risks arising from non-trading transactions. At comdirect bank AG, fair value hedges were used exclusively to hedge the fair value risk of individual securities using interest rate swaps (fair value hedge). The application of the hedge accounting rules is contingent on the comprehensive documentation of the hedging relationship and evidence of the effectiveness of the hedge. The fair values determined are reported in the balance sheet as positive fair values from derivative hedging instruments or negative fair values from derivative hedging instruments. The changes in fair value of the hedges and assets resulting from the hedged risk are recognised in the income statement under result from hedge accounting. In an effective hedge, the changes in value of an assets and the hedge recorded in the income statement will largely offset one another. (6) Cash reserve The reserve is reported at nominal value. (7) Claims All claims of the comdirect group on banks and customers are measured at amortised cost. On the balance sheet, the loan loss provisions are openly deducted and reported separately as provisions for possible loan losses. (8) Currency translation Monetary assets and liabilities carried in the balance sheet which are held in foreign currency are translated at the spot rate on the balance sheet date (reporting date rate). Income and expenses are translated at exchange rates as of the time of transaction. (9) Provisions for possible loan losses We provide for the particular credit risks in lending by forming single and portfolio loan loss provisions, with loans comprising exposure of more than 1m seen as significant. Specific loan loss provisions are formed to cover the existing credit-standing risks relating to these exposures. Loan loss provisions have to be formed for a loan if it is probable on the basis of observable criteria that not all the interest payments and capital repayments can be made as agreed. The level of the loan loss provision corresponds to the difference between the book value of the loan less the present value of the expected future cash flow.
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 79 In addition, we cover credit risks by means of portfolio loan loss provisions. The level of the portfolio loan loss provisions is determined using parameters derived from Basel II (probability of default, loss given default). The total amount for the provision for possible loan losses, insofar as it relates to claims in the balance sheet, is shown in the balance sheet separately from the respective asset items. The provisions for possible loan losses for offbalance sheet business (loan commitments) are shown as provisions for lending risks. If in an individual case, defaults are expected on claims other than in the retail lending business or lending business as part of Treasury activities, the provision for possible loan losses reduces the respective claim directly. Uncertainties pertaining to estimates arise with regard to the use of Basel II parameters. The parameters are derived from empirical values for corresponding receivables and can therefore be subject to fluctuations due to changes in framework conditions, such as developments in the macroeconomy or labour market data. These higher probabilities of default per exposure in particular can lead to an increase in provisions for possible loan losses for both utilised and unutilised loan commitments. Higher conversion factors regarding open lines of credit would only lead to an increase in the provisions for lending risks. Unrecoverable amounts are written down utilising any existing loan loss provisions. Income on written-down receivables is recognised in the income statement under provisions for possible loan losses. (10) Positive fair values from derivative hedging instruments Derivative financial instruments used for hedging purposes, which qualify for hedge accounting and show a positive fair value are reported under this item. The instruments are measured at fair value in accordance with the net present value method. The measurement results determined for fair value hedges under hedge accounting are recognised in the income statement under result from hedge accounting. (11) Trading assets Derivative financial instruments that are not used as hedging instruments as part of hedge accounting and show a positive fair value are reported as trading assets. The instruments are measured at fair value. The changes in fair value as well as interest income and expenses are recorded in the income statement under the trading result. (12) Financial investments Purchases and sales of financial assets are shown in the balance sheet in accordance with the trade date accounting method. As of the balance sheet date, all bonds, other fixed-income securities, equities and other variable-yield securities (investment fund units) not held for trading purposes were assigned to the available-for-sale category. These are reported under financial investments together with holdings in non-consolidated subsidiaries. These financial instruments are accounted for and measured at fair value. In principle, prices and quotations traded in active markets are used for this. If there is no active market, instruments from the same issuer or comparable issuer in the same industry with comparable residual maturities are used. The spreads determined from these papers are used with the aid of the discounted cash flow method as the basis for the measurement taking appropriate yield curves into account. The measurement results are posted in the revaluation reserve with an income-neutral effect and taking deferred taxes into account. Realised gains and losses only affect the income statement when securities are sold or subject to impairment.
80 Debt instruments are subject to an impairment test using quantitative or qualitative trigger events. Qualitative indications of impairment include arrears or default on interest and capital payments on the part of a counterparty. Quantitative trigger events include significant price falls as well as rating changes. Should these trigger events apply, impairments are carried out if payment defaults are to be expected. Equity instruments are also subject to an impairment test using quantitative or qualitative trigger events. An impairment is carried out for these instruments if there is a qualitative trigger event, such as considerable financial difficulties on the part of the issuer, or if a quantitative event applies. Quantitative trigger events exist if the fair value falls significantly or longer-term below the historical cost. With regard to debt instruments, reversals of impairment losses are posted in the revaluation reserve with an income-neutral effect in subsequent periods if the trigger event still applies. Where the trigger event no longer applies, reversals of impairment losses are recognised in the income statement; impairments recognised in the income statement in previous periods are charged off against the revaluation reserve with an impact on income. For equity instruments, reversals of impairments are consistently posted in the revaluation reserve with an income-neutral effect. Where there is an effective hedging relationship between securities and a derivative financial instrument, the proportion of the change in the fair value attributable to the hedged risk is reported in the income statement under result from hedge accounting. All the interest income generated by securities of the available-for-sale category is shown in the income statement under interest income. (13) Intangible assets Under intangible assets, we include internally generated software, purchased software and acquired customer relationships (customer base). Internally generated software is recognised if all provisions of IAS 38 are met. Recognition is made at production cost. Recognition of sundry intangible assets is made at historical cost. In principle, internally generated software and purchased individual software is amortised using the straight-line method and according to schedule against earnings over a period of five years; standard software over three years. Aquired customer relationships are amortised using the straightline method and according to schedule over a period of 10 years. Both the useful life and the amortisation method are reviewed for significant changes each year at the end of the reporting period. In addition they are checked annually for signs of impairment within the meaning of IAS 36 which would necessitate impairments that are recognised in the income statement. (14) Fixed assets The item fixed assets shows office furniture and equipment. All the fixed assets are capitalised at historical cost. Office furniture and equipment are depreciated using the straightline method and according to schedule to reflect their probable useful economic lives. In determining the useful life, their likely physical wear and tear, their technical obsolescence as well as legal and contractual restrictions are taken into account. All fixed assets are depreciated over a period of 3 to 20 years. Gains and losses arising from the sale of fixed assets are shown in the income statement under other operating result.
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 81 Both the useful life and the depreciation method are reviewed for significant changes each year at the end of the reporting period. In addition, they are checked annually for signs of impairment within the meaning of IAS 36 which would necessitate impairments that are recognised in the income statement. (15) Leases In accounting for leases, a distinction is made between operating leases and finance leases. A lease is classified as a finance lease if it substantially transfers all of the risks and rewards pertaining to ownership to the lessee. The accounting for the leased items is then carried out by the lessee. In contrast, where the risks and rewards pertaining to ownership are not substantially transferred to the lessee, the lease constitutes an operating lease. In such cases, the accounting for the leased item is carried out by the lessor. Essentially, the bank appears as a lessee in operating leases (bank building and offices, office furniture and equipment). (16) Liabilities Financial liabilities, with the exception of those that result from derivatives, are shown at amortised historical cost. Where there is a material difference between the nominal value and fair value at the time of recognition, the amount is carried at fair value. The difference between this and the nominal value is recognised in net interest income in accordance with the effective interest rate method. (17) Negative fair values from derivative hedging instruments Derivative financial instruments used for hedging purposes and which qualify for hedge accounting and show a negative fair value are reported under this item. The instruments are measured at fair value in accordance with the net present value method. The measurement results determined for fair value hedges under hedge accounting are recognised in the income statement under result from hedge accounting. (18) Trading liabilities Derivative financial instruments that are not used as hedging instruments as part of hedge accounting and show a negative fair value are reported as trading liabilities. The instruments are measured at fair value. The changes in fair value are recorded in the income statement under the trading result. (19) Provisions Basic principles A provision must be shown if on the balance sheet date, as the result of an event in the past, a current legal or factual obligation has arisen, an outflow of resources to meet this obligation is likely and it is possible to make a reliable estimate of the amount of this obligation. Accordingly we make provisions for liabilities of uncertain amount to third parties and anticipated losses arising from onerous contracts in the amount of the claims expected. The amount recognised as a provision represents the best possible estimate of the expense required to meet the current obligation as at the reporting date. The estimate takes account of risks and uncertainties, but this may mean that a provision is not utilised in the amount shown in subsequent periods. Provisions are recognised at their net present value if the effect of discounting is material. The provisions include items which result from restructuring of the business divisions and serve to cover settlement claims of employees or obligations arising from the termination of other contractual relationships. Here, uncertainties pertaining to estimates can refer to the assumptions made regarding the date of the end of contracts and the underlying average amounts of the contractual sums or claims.
82 The different types of provisions are allocated via various items in the income statement. Provisions in the lending business are charged to the provision for possible loan losses and the provisions for restructuring to restructuring expenses. Other provisions are in principle charged to administrative expenses. Provisions for pensions and similar obligations The company pension for the employees of the comdirect group is based on various pension schemes. On the one hand, employees acquire a vested right to benefits on the basis of an indirect benefit obligation for which a defined premium is paid to Versicherungsverein des Bankgewerbes a.g. (BVV), Berlin. The level of the pension benefit is determined by the premiums paid and the resultant accumulated investment income (defined contribution plan). The accounting regulations pursuant to IAS 19 for a defined contribution plan are applied to this indirect pension plan, i.e. the regular premium payments to BVV are recorded as an expense in the financial year and no provision is therefore formed. On the other hand, the employees acquire vested rights to benefits on the basis of a direct benefit obligation, whereby the level of benefit is fixed and depends on factors such as age, remuneration and length of service (defined benefit plan). The accounting regulations pursuant to IAS 19 for a defined benefit plan are applied to this direct pension plan and provisions are formed accordingly. The obligations similar to those for a pension include deferred compensation. These refer to an offer to the employees whereby they give up a portion of their gross salary for pension benefits later on. Provisions are also formed for individual part-time working arrangements for older employees. For defined benefit plans, the pension obligations and similar commitments are calculated annually by an independent actuary in accordance with the projected unit credit method. In addition to biometric assumptions and the current actuarial interest rate, this calculation is based on the expected future rates of increase for salaries and pensions. The trustee required for a bilateral trust was established by Commerzbank AG in the form of the Commerzbank Pension-Trust e.v. In this regard, the companies in the comdirect group insure old-age pension obligations by means of a contractual trust agreement. The assets transferred to Commerzbank Pension-Trust e.v. (plan assets) are to be set off against the pension provisions, as the corresponding requirements of IAS 19 are met. The pension expenses relating to the defined benefit old-age pension obligations to be recognised in the income statement comprise the service cost and the interest cost. The net income expected from the trust assets reduces the pension expenses. Further information on the pension obligations granted is provided in note (49) and note (69).
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 83 If the parameters taken into account in the calculation of the pension obligations and plan assets deviate from the original expectations, this generates an actuarial gain or loss. In accordance with IAS 19.92 et seq., these are to be recognised in the income statement as of the reporting period at the start of which they exceed a corridor of 10% of the maximum of the pension obligations or the fair value of plan assets. In the comdirect group, these actuarial gains or losses are recorded faster than over the average remaining period of service of the beneficiaries. (20) Income taxes Current income tax assets and liabilities are calculated by applying the valid tax rates at which a refund from or a payment to the relevant tax authorities is expected. Temporary differences are the result of the discrepancy between assigned value in accordance with IAS/IFRS and the valid tax regulations, measured using the German income tax rate which can be expected to apply for the period in which they are realised. Deferred income tax assets are shown in the balance sheet only if taxable profits are likely to occur in the same tax unit in the future. Income tax assets and liabilities are formed and carried such that depending on the treatment of the underlying item they are recognised either under taxes on income in the income statement or they are set off against the relevant equity items with no effect on the income statement. Current and deferred income tax assets and liabilities are netted against one another where they exist towards the same tax authority and the right of set-off can actually be enforced vis à vis the tax authority. (21) Conditional and authorised capital The Board of Managing Directors of comdirect bank AG is authorised until 5 May 2014, with the consent of the Supervisory Board, to increase the share capital of the company by issuing new shares against cash or non-cash contributions on one or more occasions yet up to a maximum amount of 70.0m (authorised capital 2009). The shareholders are in principle to be granted a subscription right; the statutory subscription right can also be granted through the new shares being underwritten by a bank or a bank consortium with the obligation of offering them for subscription to the shareholders of comdirect bank Aktiengesellschaft. Through the resolution adopted on 9 May 2008 and its entry into the commercial register on 3 July 2008, a conditional capital of 30.0m was created (conditional capital 2008). The conditional capital 2008 increase will only be effected to the extent that holders and/or creditors of convertible bonds or convertible profit-sharing certificates or of warrants from bonds with warrants or profit-sharing certificates with warrants may exercise their option or conversion rights or fulfil their conversion obligations. The Board of Managing Directors is authorised to issue, with the approval of the Supervisory Board, bearer bonds with convertible bonds or bonds with warrants or profitsharing certificates as mentioned above on one or more occasions, up to a maximum amount of 300.0m with or without a fixed maturity. This authorisation is limited until 8 May 2013. (22) Earnings In principle, earnings are accounted for at fair value of the consideration. Interest income, with the exception of that from derivatives in the held-for-trading category, is recognised using the effective interest rate method. Commission income is recognised in principle if the underlying service was provided. For charges relating to specific periods (e.g. custody charges, account charges), the fees are deferred on the reporting date.
84 (23) Appropriation of profits The basis for the appropriation of profits is the national legislation, especially the German Commercial Code (HGB) and the Stock Corporation Act (AktG). For financial year 2010, comdirect bank AG reported a distributable profit according to the German Commercial Code (HGB) of 59,312,742.30. The Board of Managing Directors and the Supervisory Board of comdirect bank AG will propose to the annual general meeting a dividend payment in the amount of 59.3m, which is commensurate to 0.42 per no-par value bearer share. (24) Earnings per share Undiluted earnings per share are calculated in accordance with IAS 33 and based on the net profit for the year. The figure calculated is shown below the income statement. As in the previous year, diluted earnings correspond to undiluted earnings. (25) Performance share plan (share-based compensation) A new long-term incentive programme (LTIP) was issued for the employees of comdirect bank AG in 2005 for the first time as a component with a long-term incentive effect and risk elements. As the beneficiaries of this LTIP, the members of the Board of Managing Directors and selected managers and executives will receive a conditional allocation of virtual, non-fungible shares (performance shares) in yearly tranches. The shares encompass the conditional right to a cash payment at the end of the three-year waiting period. The level of the cash payment depends on achieving performance targets which are set at the beginning of the planning period and the current share price at the end of the waiting period. The performance targets set at the beginning of the planning period are based on total shareholder return (TSR), an indicator which takes both share price performance and the dividends paid during the waiting period into account. The number of performance shares falling due for payment depends equally on the TSR outperformance targets as compared with the Prime Financial Services Performance Index and the absolute rise in TSR of the comdirect share. However, for both performance targets there are set hurdles that must be overcome before the performance shares become valuable and due for payment. With regard to TSR outperformance (subset A), the share price of comdirect bank AG during the three-year waiting period must be at least as good as the reference index. If the comdirect share price including dividends paid has increased in absolute terms over the same period (subset B) by at least 25% compared to the price on issue, this subset also becomes valuable. The total payout from the performance share plan is capped. Should the performance targets set at the beginning of the planning period not be met, the performance shares lapse at the end of the waiting period. Both subsets comply with the requirements of the German Corporate Governance Code. The volume of the LTI component, the LTI target value of each eligible beneficiary, amounts to a percentage of the individual basic salary. The individual number of performance shares is derived by dividing the LTI target value and the fair value of a performance share at the time of issue. The fair value of a performance share is determined using an option measurement model before each tranche is set up. The Supervisory Board or the Board of Managing Directors decides on the allocation of performance shares. The value of the performance shares as of the reporting date is determined by an external expert. The model used is based on the arbitrage-free valuation according to Black/Scholes. A numerical solution option is necessary because of the complexity of the option programme and the procedure used is the three-dimensional binomial model.
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 85 (26) Related party disclosures Relations with affiliated companies The parent company of comdirect bank AG is Commerzbank Inlandsbanken Holding GmbH. The ultimate parent company is Commerzbank AG. comdirect bank AG uses services provided by Commerzbank AG through a general agreement effective as of 1 January 1999, as well as through service level agreements on this basis. On 6 August 2007, a master agreement was concluded with Commerzbank AG which superseded the existing general agreement. The individual contracts concluded under the general agreement remain in place until expiry of their respective term. New individual contracts will be concluded based on the master agreement. On the basis of the general agreement and the master agreement, the following services were agreed upon and used during financial year 2010: Trading and processing services Payments and cash dispenser service Printing services IT services Risk management Handling of financial instruments in own trading and credit services Compliance Internal audit Use of Intelligence Commerzbank (ICOM) securities trading system Project services, e.g. final withholding tax Other services In total, the expenses for the above services amounted to 24.4m in the financial year. The integration of Dresdner Bank into Commerzbank also necessitates adjustments to comdirect s IT systems or to the interfaces to these systems. Commerzbank will compensate comdirect for the costs incurred. In this context, Commerzbank and comdirect have agreed on project agreements with each other, along with service and price sheets. In the reporting year, the earnings generated from these agreements totaled 1.4m. Outside of the general agreement, there are also further business relations with Commerzbank AG: Through its connection to Commerzbank, comdirect bank offers its customers new issues and a range of certificates for subscription. These sales are remunerated in line with the commission for the banking syndicate or issuing institution. In addition, comdirect bank receives pro rata commission for carrying out capital measures. In total, comdirect received commission of 0.1m in relation to the above in financial year 2010. In joint campaigns with Commerzbank, comdirect offered its customers the opportunity to buy and sell Commerzbank warrants and certificates OTC for a limited period of time, whereby comdirect bank waived the commission payable by the customer on all transactions with a defined maximum volume. In return, comdirect bank received a refund of the lost order commission from Commerzbank. comdirect bank AG is party to an agreement of Commerzbank AG with Brown Brothers Harriman, enabling customers of comdirect bank to trade on US stock exchanges. comdirect bank currently offers its customers approximately 10,000 funds from more than 150 investment companies, including investment companies of the Commerzbank Group. In financial year 2010, comdirect bank received sales and sales follow-up commission at prevailing market rates from the investment companies of the Commerzbank Group.
86 For placement activities for the benefit of European Bank for Fundservices GmbH (ebase), Commerzbank AG received sales and ongoing sales follow-up commission amounting to 14.0m in financial year 2010. As part of its processing and management services for custody accounts, ebase procures support and services from Commerzbank AG. In financial year 2010, Commerzbank received payment of 1.0m for these services. On 22 March 2000, comdirect bank AG concluded an agreement with Commerzbank AG. Among other things, the agreement relates to support for PR activities, compliance with stock exchange and other obligations resulting from admission to the stock exchange and advice on the holding of the public annual general meeting of shareholders. On 15 March 2005, comdirect bank AG concluded an agreement with Commerzbank AG concerning the cash receiving office and depository service for the shares of comdirect bank. As part of its money and capital market transactions, comdirect bank invests money with Commerzbank AG and its affiliated companies. As of the reporting date, the nominal value of such transactions amounted to 5,453m. In financial year 2010, comdirect bank achieved total interest income from these transactions with Commerzbank of 68.1m and of 6.6m with its affiliated companies. A separate general agreement has been concluded between comdirect bank AG and Commerzbank AG for these money and capital market transactions. As of the reporting date, the portfolio included bonds and notes from affiliated companies amounting to 3,086m. Interest income on this item amounted to 80.4m for the full financial year. On 16 May 2000, a general agreement on securities lending was concluded with Commerzbank, whereby comdirect bank can lend securities to Commerzbank. During the reporting year, income of 2.6m was generated on the average portfolio of lent securities amounting to 1.6bn. In conjunction with the general agreement on the liquidity transfer, concluded in May 2009, comdirect has concluded with Commerzbank AG an assignment agreement for a portfolio of loans to customers comprising retail loans. The assignment of receivables to comdirect bank by Commerzbank is carried out to secure all existing, future and also conditional claims which accrue to comdirect bank against Commerzbank and/or its group companies under the general agreement or other loans. Commerzbank received payment of 1.1m under this assignment agreement. Commerz Direktservice GmbH, whose sole shareholder is Commerzbank, provides call centre services for the purposes of gaining and supporting customers and promoting sales, primarily for customers of and on behalf of Commerzbank. Commerz Direktservice GmbH does not have its own customer base. comdirect bank AG has service agreements with Commerz Direktservice GmbH in the field of operating customer business and provision of operating resources. In financial year 2010, comdirect bank received payment of 3.3m for these services. comdirect bank AG and its affiliated companies have insured old-age pension obligations by means of an allocation to trust assets with Commerzbank Pension-Trust e.v. As of 31 December 2010 the market value of trust assets administered in the trust totalled 4.0m (2009: 4.1m). In the third quarter of 2008, a framework lease agreement was concluded with Commerz Real Leasingservice GmbH & Co. KG for vehicles, as was a framework agreement for the supply of fuel. In 2010, 0.3m was paid for the services provided by Commerz Real.
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 87 With an agreement dated 9 January 2003, comdirect bank AG acquired a holding in WST-Broker GmbH, Frankfurt/ Main. WST-Broker GmbH routes customer orders to execution on the trading floors on behalf of comdirect bank AG. The Board of Managing Directors reports separately on the scope and appropriateness of the intra-group services of comdirect bank AG with affiliated companies as part of its dependency report (Section 312 German Stock Corporation Act (AktG)). Other related party disclosures In the financial year, there were financial relations with related natural persons (members of the Board of Managing Directors and the Supervisory Board and members of their immediate family), including in the form of comdirect bank product use as part of the normal product and service offering. All products and services were carried out at normal third party terms and conditions and are of secondary importance for the company. The related parties did not accrue any unjustified advantage from their position with comdirect bank, nor did comdirect bank suffer any financial losses. In addition to the financial relations as part of the product and service offering of comdirect bank, related parties received compensation on the basis of their position as members of the boards (see note (69)). There were no other financial relations with related natural persons in the financial year.
88 Notes to the income statement (27) Net interest income before provisions thousand 2010 2009 Change in % Interest income from fixed-income securities held in the available-for-sale portfolio 113,535 131,443 13.6 Interest income from credit and money market transactions 96,711 132,617 27.1 Operating income from investments, shares and other variable-yield securities 1,034 1,805 42.7 Interest income and similar income 211,280 265,865 20.5 Interest expenses for deposits 109,136 157,124 30.5 Interest expenses from finance leases 7 36 80.6 Balance of interest from derivative hedging instruments 63 0 Other interest expenses 0 12 100.0 Interest expenses 109,206 157,172 30.5 Total 102,074 108,693 6.1 Interest income and interest expenses for financial instruments measured in accordance with IAS 39 At fair value through profit or loss sub-category: held for trading, are reported under trading result (see note (31) Trading result). (28) Provisions for possible loan losses The provisions of the comdirect group break down as follows: thousand 2010 2009 Change in % Allocation to provisions 2,258 2,438 7.4 Write-back of provisions 2,780 3,846 27.7 Direct write-downs 788 835 5.6 Income received on written-down claims 12 726 98.3 Total 255 1,299 119.6 (29) Net commission income thousand 2010 2009 Change in % Securities transactions 158,104 139,273 13.5 Payment transactions 7,957 5,312 49.8 Other commission 6,711 4,172 60.9 Total 172,772 148,757 16.1
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 89 (30) Result from hedge accounting The results shown from underlying and hedging transactions only include measurement effects from effective fair value hedges. thousand 2010 2009 Change in % Results from hedging instruments 100 0 Results from hedged assets 122 0 Total 22 0 comdirect bank reports these in line with the hedge accounting regulations under IAS 39. The individual bonds (assets) in the balance sheet line item financial investments are hedged against fluctuations in fair value due to changes in market rates using interest rate swaps. (31) Trading result thousand 2010 2009 Change in % Result from interest rate related transactions 0 836 100.0 Trading result 0 836 100.0 All financial instruments in the trading portfolio are measured at fair value. The trading result includes all interest income and interest expenses for financial instruments measured in accordance with IAS 39 in the category At fair value through profit or loss sub-category: held for trading. (32) Result from financial investments The disposal proceeds and gains and losses from impairments and recoveries in the available-for-sale securities portfolio and holdings in subsidiaries which have not been consolidated are shown in the result from financial investments. thousand 2010 2009 Change in % Disposal gains 14,453 31,036 53.4 Disposal losses 4,120 4,260 3.3 Recoveries 0 7 100.0 Impairment 414 5,933 93.0 Total 9,919 20,850 52.4 (33) Administrative expenses The comdirect group s administrative expenses consist of personnel expenses, other administrative expenses and depreciation of office furniture and equipment as well as on intangible assets. Personnel expenses thousand 2010 2009 Change in % Wages and salaries 52,266 52,814 1.0 Compulsory social security contributions 8,816 8,651 1.9 Expenses for pensions and other employee benefits 1,481 876 69.1 Total 62,563 62,341 0.4 The item wages and salaries includes share-based payments (IFRS 2) totalling 1,521 thousand (2009: 1,067 thousand).
90 In the reporting year, reversals of provisions, especially for variable compensation, were shown for the first time as reduction related to expenses for wages and salaries ( 1,185 thousand) and of expenses related to compulsory social security contributions ( 116 thousand). Breakdown of expenses for pensions and other employee benefits thousand 2010 2009 Change in % Company pension scheme 1,461 857 70.5 Contributions to Versicherungsverein des Bankgewerbes a.g. (BVV) 20 19 5.3 Total 1,481 876 69.1 Other administrative expenses thousand 2010 2009 Change in % Marketing expenses 53,021 41,441 27.9 Communication expenses 4,353 7,022 38.0 Consulting expenses 7,334 11,702 37.3 Expenses for external services 30,258 25,435 19.0 Sundry administrative expenses 38,438 38,601 0.4 Total 133,404 124,201 7.4 Sundry administrative expenses includes rental and lease payments for business premises as well as contributions to the Deposit Protection Fund of 13,577 thousand. Depreciation of office furniture and equipment and intangible assets thousand 2010 2009 Change in % Office furniture and equipment 4,669 4,633 0.8 Intangible assets 9,392 7,743 21.3 Total 14,061 12,376 13.6 (34) Other operating result thousand 2010 2009 Change in % Other operating income 14,217 20,242 29.8 Income from writing-back of provisions and accruals 4,619 5,206 11.3 Income from service level agreements 5,345 6,963 23.2 Income from recoverable input taxes 195 973 80.0 Sundry income items 4,058 7,100 42.8 Other operating expenses 7,803 16,821 53.6 Expenses for services rendered 1,495 3,208 53.4 Goodwill payments and price differences in security transactions 933 1,142 18.3 Non-income-related taxes including interest from previous years 493 4,522 89.1 Losses on the disposal of fixed assets 109 222 50.9 Loan loss provisions and write-downs outside retail lending 99 3,111 96.8 Sundry expense items 4,674 4,616 1.3 Total 6,414 3,421 87.5
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 91 (35) Taxes on income thousand 2010 2009 Current taxes on income current year 21,031 21,613 Current taxes on income from previous years 496 978 Deferred taxes 705 1,266 Total 21,240 19,369 Reconciliation of taxes on income thousand 2010 2009 Profit from ordinary activities of comdirect bank AG and ebase GmbH 80,874 75,993 multiplied by the respective income tax rate for the company = Calculated income tax paid in financial year 21,180 19,780 Effect of tax-free income from financial investments 38 779 Effect of losses from financial investments; not tax deductible 308 0 Effect of taxes from previous years recognised in the financial year 342 114 Other effects 132 482 Total 21,240 19,369 The income tax rate selected as a basis for the reconciliation is composed of the corporation income tax rate of 15.0% applicable in Germany, plus a solidarity surcharge of 5.5% and a rate for trade earnings tax of 10.15% for comdirect bank AG (Quickborn location) and 12.25% for ebase GmbH (Aschheim location). As in the previous year, this produces an income tax rate of around 25.98% for comdirect bank AG and around 28.08% for ebase GmbH.
92 Notes to the balance sheet (36) Cash reserve The cash reserve includes the following items: thousand 31.12.2010 31.12.2009 Change in % Cash on hand 134 281 52.3 Balances held at central banks 184,833 282,546 34.6 Total 184,967 282,827 34.6 The minimum reserve requirement to be met at the end of December 2010 totalled 190,288 thousand (31.12.2009: 174,618 thousand). (37) Claims on banks thousand Total Due on demand Other claims 31.12.2010 31.12.2009 Change 31.12.2010 31.12.2009 31.12.2010 31.12.2009 in % German banks 5,873,275 4,731,021 24.1 1,067,915 678,480 4,805,360 4,052,541 Foreign banks 21,000 30,000 30.0 0 0 21,000 30,000 Total 5,894,275 4,761,021 23.8 1,067,915 678,480 4,826,360 4,082,541 The claims on banks include foreign currency amounts of 78,111 thousand (2009: 60,765 thousand). Claims on banks primarily comprise promissory notes in the amount of 3,064,178 thousand (2009: 1,589,441 thousand) as well as overnight money and fixed-term deposits totalling 2,732,282 thousand (2009: 3,025,663 thousand). (38) Claims on customers thousand Total Due on demand Other claims 31.12.2010 31.12.2009 Change 31.12.2010 31.12.2009 31.12.2010 31.12.2009 in % Claims on German customers 230,850 201,993 14.3 229,835 200,926 1,015 1,067 Companies and financial institutions 35,325 23,581 49.8 35,325 23,581 0 0 Private customers 195,525 178,412 9.6 194,510 177,345 1,015 1,067 Claims on international customers 6,688 4,206 59.0 6,688 4,206 0 0 Private customers 6,688 4,206 59.0 6,688 4,206 0 0 Total 237,538 206,199 15.2 236,523 205,132 1,015 1,067 Claims on customers include 164,211 thousand (2009: 147,214 thousand) from loans against securities. These claims are secured by securities. The claims to customers include amounts in foreign currency totalling 2.1 thousand (2009: 0.4 thousand).
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 93 (39) Provisions for possible loan losses Provisions for possible loan losses by balance sheet item thousand As of 1.1.2010 Utilised Reversal Allowance As of 31.12.2010 Provisions for possible loan losses for on-balance sheet lending transactions 2,160 165 1,768 1,453 1,680 Claims on customers 2,160 165 1,768 1,426 1,653 Significant lending business 0 0 0 4 4 Non-significant lending business 2,160 165 1,768 1,422 1,649 Claims on banks 0 0 0 27 27 Provisions for credit risks 1,405 4 1,012 805 1,194 Total 3,565 169 2,780 2,258 2,874 Provisions for possible loan losses by individual and portfolio risks thousand Total Single loan loss provisions Portfolio loan loss provisions 2010 2009 Change 2010 2009 2010 2009 in % Balance as of 1 January 2,160 5,170 58.2 0 451 2,160 4,719 Reclassifications 0 1,770 0 451 0 1,319 Allowances 1,453 1,428 1.8 0 0 1,453 1,428 Deductions 1,933 2,668 27.5 0 0 1,933 2,668 of which utilised 165 187 11. 8 0 0 165 187 of which reversals 1,768 2,481 28.7 0 0 1,768 2,481 Provisions for possible loan losses as of 31 December 1,680 2,160 22.2 0 0 1,680 2,160 The provisions for possible loan losses have been accrued for transactions reported on the balance sheet. Most of the provisions for loan losses refer to banking products. There were no losses or defaults to report with regard to significant commitment. (40) Financial investments The item financial investments consists of the bonds and other fixed-income securities, equities and other variable-yield securities not held for trading purposes, as well as holdings in subsidiaries not included in the consolidation. The financial instruments shown in the financial investments portfolio are allocated to the category available-forsale and, with the exception of holdings in subsidiaries not included in the consolidation, are valued at fair-value.
94 thousand 31.12.2010 31.12.2009 Change in % Bonds, notes and other fixed-income securities of the available-for-sale portfolio 4,637,045 4,449,026 4.2 Money market instruments 124,574 0 issued by public sector borrowers 94,326 0 issued by other borrowers 30,248 0 Bonds and notes 4,512,471 4,449,026 1.4 issued by public sector borrowers 126,703 52,266 142.4 issued by other borrowers 4,385,768 4,396,760 0.3 Equities and other variable-yield securities of the available-for-sale portfolio 33,923 29,920 13.4 Holdings in subsidiaries 27 27 0.0 Total 4,670,995 4,478,973 4.3 Financial investments include amounts in foreign currency totalling 20,160 thousand (2009: 0 thousand). As part of its securities lending transactions, comdirect bank AG has transferred bonds and notes with a nominal value of 1,874,750 thousand. The book values of the transferred bonds and notes as of the reporting date amounted to 1,872,498 thousand (2009: 1,709,268 thousand). In securities lending transactions, the risks and rewards of the securities loaned remain with the lender of securities. The lender bears the credit and market price risks and is entitled to the current income and other rights accruing from this paper. (41) Intangible assets thousand 31.12.2010 31.12.2009 Change in % Internally generated software 19,689 20,071 1.9 Software purchased 4,277 3,128 36.7 Acquired customer relationships 5,868 7,042 16.7 Total 29,834 30,241 1.3 Changes in intangible assets are shown in the schedule of assets (Note (43)). (42) Fixed assets thousand 31.12.2010 31.12.2009 Change in % Land and buildings 0 3,309 100.0 Office furniture and equipment 12,880 14,244 9.6 Total 12,880 17,553 26.6 Changes in fixed assets are shown in the schedule of assets (Note (43)).
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 95 (43) Schedule of assets thousand Intangible assets Internally generated software Software purchased Acquired customer relationships 2010 2009 2010 2009 2010 2009 Book value as of 1 January 20,071 17,032 3,128 3,624 7,042 8,215 Cost of acquisition/manufacture as of 1 January 70,846 79,899 34,815 33,634 11,592 11,591 Additions 6,083 7,932 2,918 1,181 0 1 Disposals 4 16,985 16 0 0 0 Cost of acquisition/manufacture as of 31 December 76,925 70,846 37,717 34,815 11,592 11,592 Cumulative write-downs as of 1 January 50,775 62,867 31,687 30,010 4,550 3,376 Additions 6,465 4,893 1,754 1,677 1,174 1,174 Disposals 4 16,985 1 0 0 0 Cumulative write-downs as of 31 December 57,236 50,775 33,440 31,687 5,724 4,550 Book value as of 31 December 19,689 20,071 4,277 3,128 5,868 7,042 thousand Fixed assets Land Office furniture and equipment 2010 2009 2010 2009 Book value as of 1 January 3,309 3,309 14,244 15,712 Cost of acquisition/manufacture as of 1 January 3,309 3,309 59,181 56,273 Additions 0 0 3,448 3,449 Disposals 3,309 0 210 541 Cost of acquisition/manufacture as of 31 December 0 3,309 62,419 59,181 Cumulative write-downs as of 1 January 0 0 44,937 40,561 Additions 0 0 4,669 4,632 Disposals 0 0 67 256 Cumulative write-downs as of 31 December 0 0 49,539 44,937 Book value as of 31 December 0 3,309 12,880 14,244 thousand Investments Holdings in subsidiaries 2010 2009 2010 2009 Book value as of 1 January 0 0 27 27 Cost of acquisition/manufacture as of 1 January 10,500 10,500 27 27 Additions 0 0 0 0 Disposals 0 0 0 0 Cost of acquisition/manufacture as of 31 December 10,500 10,500 27 27 Cumulative write-downs as of 1 January 10,500 10,500 0 0 Additions 0 0 0 0 Disposals 0 0 0 0 Cumulative write-downs as of 31 December 10,500 10,500 0 0 Book value as of 31 December 0 0 27 27
96 (44) Income tax assets thousand 31.12.2010 31.12.2009 Current income tax assets 4,103 3,774 Total 4,103 3,774 The deferred income tax assets and liabilities are netted out as they relate to the same tax authorities. In financial year 2010, the netting of deferred income tax assets and liabilities produced an income tax liability. A breakdown is given in note (50). Of the current income tax assets of 4,103 thousand (2009: 3,774 thousand), 3,635 thousand will probably be realised after the end of 2011 (2009: 1,394 thousand after the end of 2010). (45) Other assets thousand 31.12.2010 31.12.2009 Change in % Deferred items 330 176 87.5 Receivables from local advisory services 1,122 1,520 26.2 Claims on product providers 1,963 1,411 39.1 Claims on group companies 162 120 35.0 Receivables from securities transactions 1,010 770 31.2 Trade receivables 117 611 80.9 Salary advances 900 668 34.7 Other 1,644 1,527 7.7 Total 7,248 6,803 6.5 With the exception of receivables from local advisory services, we assume an average remaining lifetime for other assets of less than one year. This also applied in the previous year. The valuation allowances applied to receivables from local advisory services were as follows: thousand 2010 2009 As of 1 January 6,160 5,485 Additions 159 1,255 Reversals 1,508 580 Loan loss provisions as of 31 December 4,811 6,160
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 97 (46) Liabilities to banks thousand 31.12.2010 31.12.2009 Change in % German banks 40,779 923 4,318.1 Total 40,779 923 4,318.1 At 38,726 thousand, the majority of liabilities to banks relate to a bank clearing account with Commerzbank AG. Liabilities to banks exclusively comprise liabilities due on demand (see note (54) Maturities, by remaining lifetime ). (47) Liabilities to customers thousand Total Due on demand With agreed maturity or withdrawal notice 31.12.2010 31.12.2009 Change 31.12.2010 31.12.2009 31.12.2010 31.12.2009 in % Germany 10,144,202 8,922,242 13.7 9,224,520 8,014,271 919,682 907,971 Private customers 10,104,477 8,901,045 13.5 9,188,232 7,995,112 916,245 905,933 Corporate customers and self-employed private individuals 39,725 21,197 87.4 36,288 19,159 3,437 2,038 International 223,866 202,550 10.5 198,663 175,402 25,203 27,148 Private customers 223,866 201,540 11.1 198,663 174,392 25,203 27,148 Corporate customers and self-employed private individuals 0 1,010 100.0 0 1,010 0 0 Total 10,368,068 9,124,792 13.6 9,423,183 8,189,673 944,885 935,119 Liabilities to customers include foreign currency amounts of 98,265 thousand (2009: 60,752 thousand). Through the Deposit Protection Fund of the Association of German Banks (Bundesverband deutscher Banken e.v.), each customer is insured for deposits of up to 109.5m (comdirect bank AG customers) or 5.1m (ebase GmbH customers). In addition, comdirect bank AG is a member of Entschädigungseinrichtung deutscher Banken GmbH (German Banks Compensation Fund). (48) Negative fair values from derivative hedging instruments Derivative financial instruments used for hedging purposes and covered by hedge accounting and showing a negative fair value are disclosed in this item: thousand 31.12.2010 31.12.2009 Change Negative fair values from allocated effective fair value hedges 38 0 in % Only interest rate swaps are used for hedging purposes. They are carried at fair value. The nominal volume of the financial instruments amounts to 20m (2009: 0m).
98 (49) Provisions thousand 31.12.2010 31.12.2009 Change in % Provisions for pensions and similar commitments 14,377 12,945 11.1 Other provisions 29,588 36,622 19.2 Total 43,965 49,567 11.3 Provisions for pensions and similar commitments comprise pension obligations, deferred compensation, partial retirement contracts and early retirement funds (for details see note (19)). 371 thousand (2009: 47 thousand) are attributed to partial retirement and early retirement obligations. Pension obligations and deferred compensation are explained in the following. Breakdown of pension obligations and deferred compensation shown in the balance sheet: thousand 31.12.2010 31.12.2009 Net present value of pension obligations 19,151 17,384 Market value of plan assets 3,763 3,739 Unrecognised actuarial gains and losses 1,382 687 Total 14,006 12,958 Allocation to balance sheet items: thousand 31.12.2010 31.12.2009 Provisions for pensions and deferred compensation 14,006 12,992 Other assets 0 34 The other assets in the previous year column refered to a surplus in the plan assets as compared to the pension obligations of comdirect private finance AG. The company was merged into comdirect bank AG in the reporting year. Breakdown of allocations to provisions for pensions as recognised in the income statement: thousand 2010 2009 Current service expenses 567 487 Interest expenses 909 821 Expected returns from plan assets 213 213 Actuarial gains and losses 101 366 Total allocations 1,364 729 All the types of expenses indicated above are reported under administrative expenses.
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 99 The expenses for old-age pensions ( 1,481 thousand, see note (33), 2009: 876 thousand) also include the costs for partial retirement contracts and early retirement scheme of 90 thousand (2009: 83 thousand), for pension insolvency insurances of 7 thousand (2009: 45 thousand) as well as costs for the Versicherungsverein des Bankengewerbes a.g. (BVV) amounting to 20 thousand (2009: 19 thousand). The actual gains on plan assets amounted to 335 thousand (2009: 179 thousand). A return of 5.7% (2009: 6.0%) p.a. was used to calculate the expected return. Changes in the net present value of pension obligations and the fair value of plan assets during the financial year: As a result of employees moving between companies in the comdirect group and Commerzbank AG, payments amounting to the net present value of the vested pension claims were transferred to the new employer. thousand 2010 2009 Net present value of pension obligations as of 1 January 17,384 13,890 Allocations Current service expenses 567 487 Contributions from employees from salary sacrifice 0 154 Interest expenses 909 821 Migrations 0 179 Utilised Pension benefits paid 490 451 Migrations 139 0 Actuarial gains and losses 920 2,304 Net present value of pension obligations as of 31 December 19,151 17,384 thousand 2010 2009 Market value of plan assets as of 1 January 3,739 3,851 Allocation to plan assets 0 21 Refunds for settlements 0 113 Refunds for pension benefits 312 199 Expected returns from plan assets 213 213 Actuarial gains and losses 123 34 Market value of plan assets as of 31 December 3,763 3,739 Almost all the plan assets are invested in investment units. Overview of pension obligations and plan assets: thousand 31.12.2010 31.12.2009 31.12.2008 31.12.2007 31.12.2006 Net present value of pension obligations 19,151 17,384 13,890 15,043 16,658 Plan assets 3,763 3,739 3,851 5,261 1,340 Deficit 15,388 13,645 10,039 9,782 15,318 Experience-based adjustments to pension obligations 340 2,304 1,233 2,997 521 Experience-based adjustments to fair value of plan assets 123 34 386 172 39
100 The calculations are based on the Heubeck RT 2005G mortality tables (modified). Furthermore the following parameters are included in the actuarial calculations: in % 31.12.2010 31.12.2009 Calculatory interest rate 4.90 5.30 Changes in salaries 2.50 2.50 Changes in pensions 1.80 1.80 Expected interest earned on plan assets 5.70 6.00 Changes in other provisions: thousand As of 1.1.2010 Utilised Written-back Allocation Reclassification As of 31.12.2010 Provisions for non-income related taxes 9,506 0 0 235 0 9,741 Provisions for staff 9,368 6,927 1,302 7,868 0 9,007 Provisions for contingent losses 2,268 1,266 1,002 0 0 0 Provisions for interest from additional tax claims 2,900 0 0 823 0 3,723 Provisions for restructuring 8,945 4,466 1,079 0 446 2,954 Other provisions 3,635 775 1,509 2,378 434 4,163 Total 36,622 13,434 4,892 11,304 12 29,588 The provisions for staff mainly relate to provisions for bonuses, which are scheduled to be used in financial year 2011. This item also includes provisions for anniversary expenses of 645 thousand (2009: 854 thousand) as well as 1,686 thousand (2009: 794 thousand) for performance shares. In the B2B business line, 446 thousand from the restructuring provisions were reallocated to provisions for pensions and similar commitments in the reporting period. In the course of comdirect private finance AG s merger into comdirect bank AG, other liabilities in the amount of 434 thousand were reclassified as other provisions. Other provisions include provisions for credit risks amounting to 1,195 thousand (2009: 1,405 thousand). Changes in provisions for contingent losses break down as follows: thousand As of 1.1.2010 Utilised Written-back Allocation Reclassification As of 31.12.2010 Implementation of the com one programme for the future 1,250 1,250 0 0 0 0 Sale of comdirect ltd 1,000 0 1,000 0 0 0 Other 18 16 2 0 0 0 Provisions for contingent losses 2,268 1,266 1,002 0 0 0
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 101 Within other provisions, we expect a remaining lifetime of more than one year for the provisions for non-income related taxes, provisions for interest from additional tax claims and for provisions for performance shares. In the previous year, this estimate applied to the provisions for the implementation of the com one programme for the future as well as provisions for performance shares. Provisions for restructuring include the following measures: thousand As of 1.1.2010 Utilised Written-back Allocation Reclassification As of 31.12.2010 Measures related to the withdraw from the local advisory services 4,496 2,358 884 0 0 1,254 Measures to improve efficiency and realign the sales of ebase GmbH 4,449 2,108 195 0 446 1,700 Provisions for restructuring 8,945 4,466 1,079 0 446 2,954 For a portion of the provisions for restructuring, we anticipate a remaining lifetime of more than one year. This estimate also applied in the previous year. (50) Income tax liabilities Income tax liabilities break down as follows: thousand 31.12.2010 31.12.2009 Current income tax liabilities 4,521 14,772 Deferred income tax liabilities 14,798 18,898 Total 19,319 33,670 Current income tax liabilities include liabilities for the current and previous financial years. Deferred income tax assets and liabilities are netted out, since they are due to the same tax authority. In financial year 2010 the netting of deferred income tax assets and liabilities produces a passive income tax liability. Deferred income tax liabilities breakdown as follows: thousand Income tax Income tax 31.12.2010 balance Income tax Income tax 31.12.2009 balance assets liabilities assets liabilities Negative fair values from derivative hedging instruments 10 0 10 0 0 0 Provisions for possible loan losses 201 0 201 733 0 733 Financial investments Recognised as income 6,003 0 6,003 5,551 0 5,551 Not recognised as income 29 17,828 17,799 0 22,621 22,621 Intangible assets 0 5,306 5,306 0 5,413 5,413 Liabilities to customers 305 0 305 0 0 0 Provisions 1,788 0 1,788 2,872 20 2,852 Total 8,336 23,134 14,798 9,156 28,054 18,898
102 Of the current income tax liabilities in the amount of 4,521 thousand (2009: 14,772 thousand), 1,251 thousand (2009: 11,710 thousand after the end of 2010) are expected to be due after the end of 2011. Of the deferred income tax liabilities in the amount of 14,798 thousand (2009: 18,898 thousand), 11,098 thousand (2009: 14,174 thousand after the end of 2010) are expected to be due after the end of 2011. As in the previous year, as of 31.12.2010, the deferred income tax assets and liabilities were measured at the current valid German tax rates. The applicable income tax rate used to measure the liabilities comprises the corporation tax rate in Germany valid as of 1 January 2008 of 15.0% plus the solidarity surcharge of 5.5% and the trade tax rate of 10.15% for comdirect bank AG (Quickborn location) and 12.25% for ebase GmbH (Aschheim location). This produces a German income tax rate of around 25.98% for comdirect bank AG and around 28.08% for ebase GmbH. (51) Other liabilities thousand 31.12.2010 31.12.2009 Change in % Liabilities from other taxes 18,646 13,604 37.1 Trade liabilities 22,451 20,609 8.9 Liabilities to affiliated companies 10,206 7,778 31.2 Other 2,470 928 166.2 Total 53,773 42,919 25.3 Other liabilities do not include any material items with a remaining lifetime of more than 12 months. This was also the case in the previous year. (52) Equity thousand 31.12.2010 31.12.2009 Change in % Subscribed capital 141,221 141,221 0.0 Capital reserve 223,296 223,296 0.0 Retained earnings 59,671 59,350 0.5 Revaluation reserve 30,717 51,592 40.5 Consolidated profit 59,313 57,901 2.4 Equity 514,218 533,360 3.6
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 103 Subscribed capital Subscribed capital comprises no-par value shares. Number Number of shares held as of 1.1.2010 141,220,815 Issue of new shares 0 Number of shares held as of 31.12.2010 141,220,815 There are no privilegs or restrictions related to dividend distribution at comdirect bank AG. All shares issued are fully paid up. Capital reserve The capital reserve shows free reserves as well as the amount exceeding the subscribed capital from the exercise of stock options. Retained earnings Retained earnings show the net profit which has not been distributed. Revaluation reserve Gains or losses on remeasurement of the financial investment portfolio, which is broken down into interestbearing and dividend-based instruments, are shown at fair value in the revaluation reserve, taking into account deferred taxes. Gains and losses only affect the income statement when the asset is sold or impairments or writeups are carried out. The change in the revaluation reserve amounting to 20,875 thousand after tax (2009: 61,621 thousand) comprises the decrease in the revaluation reserve before tax of 28,583 thousand (2009: increase of 83,280 thousand), current tax income totalling 2,896 thousand (2009: tax expense of 7,560 thousand) and deferred tax income of 4,812 thousand (2009: tax expense of 14,099 thousand).
104 Additional information (53) Equity management Through equity management, comdirect bank aims to meet regulatory capital requirements, to maintain adequate capital levels at all times to ensure that the bank has the capacity to act, and to achieve an appropriate return on equity. Risk-bearing capacity The risk-bearing capacity calculation, i.e. the economic capital requirement as compared to the available risk cover potential, is used to limit the overall risk of the bank in conjunction with the capital levels. The overall risk position represents the economic capital requirement for operational risks, business risks, market risks and credit risks. The risk cover potential comprise the (planned) pre-tax profit, capital reserve and retained earnings as well as the revaluation reserve. The risk-bearing capacity is ensured as long as the risk cover potential exceed the overall risk position. The economic capital is measured using the value-at-risk approach (VaR) based on a confidence level of 99.95% and a holding period of one year. At the year-end, the overall risk position of comdirect bank amounted to 146.6m (2009: 124.7m). The risk cover potential comprised the following: million 31.12.2010 31.12.2009 Pre-tax profit 80.9 76.0 Revaluation reserve (before tax) 41.1 69.7 General reserves 283.0 282.6 Risk cover potential 405.0 428.3 At the end of the financial year, the utilisation of the risk cover potential amounted to 36.2% (2009: 29.1%). The risk report contains further explanations on the overall risk position. Equity resources in accordance with Section 10, German Banking Act (KWG) comdirect bank AG is an institution registered in Germany and is a subordinate company within an institution group pursuant to Section 10a (1) of the German Banking Act (KWG). In this capacity, comdirect bank AG has exercised the waiver under Section 2a of the German Banking Act (KWG). comdirect bank AG is included in the regulatory report of the Commerzbank Group. The regulatory capital of comdirect bank AG is determined on the basis of the regulations of the German Banking Act (KWG) and the results of the calculation are used for internal management purposes. A separate notification of this is not submitted to the regulatory authorities. The main factor is the liable equity in the company financial statements of comdirect bank AG in accordance with the provisions of the German Commercial Code. Banking regulatory capital requirements were complied with at all times during the reporting year. At comdirect bank AG, the own funds ratio as of the end of the financial year stood at 42.99% (in accordance with Section 2 (6) of the Solvency Regulation (SolvV)).
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 105 thousand 31.12.2010 31.12.2009 Subscribed capital 141,221 141,221 General reserves 218,110 220,572 Deducted items 3,167 1,389 Core capital 356,164 360,404 Liable equity 356,164 360,404 Own funds for SolvV 351,144 355,906 Risk weighted assets 545,674 499,749 Eligible amount for operational risks, mulitplied by 12.5 271,075 283,075 Total 816,749 782,824 (54) Maturities, by remaining lifetime Remaining lifetimes as of 31 December 2010 thousand Total Due on demand and Up to three Three months One to five years More than five years unlimited in time months to one year Claims on banks 5,894,275 1,067,915 1,617,726 635,434 2,412,700 160,500 Claims on customers 237,538 236,523 1,015 0 0 0 Bonds, notes and other fixed-income securities in the available-for-sale portfolio 4,637,045 0 396,569 490,045 3,684,254 66,177 Total 10,768,858 1,304,438 2,015,310 1,125,479 6,096,954 226,677 Liabilities to banks 40,779 40,779 0 0 0 0 Liabilities to customers 10,368,068 9,423,183 269,216 253,067 339,075 83,527 Total 10,408,847 9,463,962 269,216 253,067 339,075 83,527 Remaining lifetimes as of 31 December 2009 thousand Total Due on demand and Up to three Three months One to five years More than five years unlimited in time months to one year Claims on banks 4,761,021 678,480 2,498,791 280,250 1,303,500 0 Claims on customers 206,199 205,132 1,067 0 0 0 Bonds, notes and other fixed-income securities in the available-for-sale portfolio 4,449,026 0 206,702 368,358 3,778,266 95,700 Total 9,416,246 883,612 2,706,560 648,608 5,081,766 95,700 Liabilities to banks 923 923 0 0 0 0 Liabilities to customers 9,124,792 8,189,673 393,400 57,034 482,506 2,179 Total 9,125,715 8,190,596 393,400 57,034 482,506 2,179 Time remaining to maturity is considered as the period between the balance sheet date and the contractual maturity of the claim or obligation.
106 (55) Claims on/liabilities to affiliated companies thousand 31.12.2010 31.12.2009 Change in % Assets Claims on banks 5,704,904 4,655,053 22.6 Financial investments 3,085,929 2,783,327 10.9 Other assets 162 127 27.6 Total 8,790,995 7,438,507 18.2 Liabilities Liabilities to banks 40,193 95 42,208.4 Other liabilities 10,206 7,676 33.0 Total 50,399 7,771 548.6 Money and capital market investments carried out via companies in the Commerzbank Group are collateralised within the scope of a general assignment agreement. (56) Risk reporting on financial instruments Risk management The risk strategy is determined by the Board of Managing Directors of comdirect bank, which also bears the responsibility for the group-wide risk management- and risk controlling system. At comdirect bank, the CFO is responsible for monitoring and implementing the risk strategy. The implementation and monitoring of the risk strategy is carried out through risk managment on the one hand and risk controlling on the other. The task of risk management is to proactively and consciously manage all risks in the relevant divisions. For effective value-oriented overall bank management, risk management is carried out on a decentralised basis in the individual divisions. The task of risk controlling is to identify, evaluate, limit and continually monitor risks and to report to the Board of Managing Directors regularly on the respective risk situation. Credit risk The credit risk describes the risk of a financial loss as a result of a borrower being unable to pay or to pay on time the contractually agreed consideration. One of the methods used to monitor credit risk is the monthly calculation of the CVaR for lending to customers and companies as well as for trading transactions. Credit risks are therefore part of overall bank management.
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 107 Maximum credit risk thousand Max. risk Assets 31.12.2010 Max. risk 31.12.2009 Cash reserve 184,967 282,827 Claims on banks 5,894,275 4,761,021 Claims on customers 235,858 204,039 Financial investments Bonds 4,512,471 4,449,026 Total 10,827,571 9,696,913 The maximum risk for group companies of Commerzbank amounts to 8,791 million (2009: 7,439 million). The figures indicated are theoretical default risks in the unlikely event of a simultaneous full default of all borrowers. Any existing securities and declining balance are not taken into account. Credit quality of financial assets that are neither overdue nor impaired thousand 31.12.2010 31.12.2009 Banks Cash reserve 184,967 282,827 Claims on banks 5,894,275 4,761,021 Financial investments Bonds 4,291,442 4,396,760 Total 10,370,684 9,440,608 Retail customers Claims on customers 230,932 193,650 Public sector issuers Financial investments Bonds 221,029 52,266 Corporates Claims on customers 0 0 Total 10,822,645 9,686,524 Overdue, but as yet unimpaired financial assets thousand Claims on customers 31.12.2010 31.12.2009 Age structure 30 to 90 days 1,366 3,293 91 to 179 days 283 624 180 days and over 2,192 485 Total 3,841 4,402
108 Individually impaired financial assets thousand Claims on customers 31.12.2010 31.12.2009 Volume of claims individually impaired 1,085 5,987 Impairment 508 1,497 Book value 577 4,490 In retail business (claims on customers), comdirect bank distinguishes between loans against securities due on demand and overdraft facilities on current accounts. Loans against securities are collateralised by pledged securities. The risk report contains further details on the extent and cause on the credit risk, on risk management, quantification and reporting as well as information on the current risk situation. Liquidity risk Liquidity risk in the narrower sense is understood as the risk that the bank will be unable to meet or to meet on time its current and future payment obligations. The wider definition of liquidity risk also encompasses refinancing risk, that is the risk that the liquidity will no be sufficient if required or that it can only be acquired in the money and capital markets at terms that are significantly less favourable than expected as well as market liquidity risk. The latter describes the risk of being unable to close out positions to the desired extent or only at a loss as a result of inadequate market depth or market disturbances. Payment claims under financial assets in accordance with contractually agreed maturities thousand Remaining lifetimes as of 31 December 2010 Book value Due on Up to One to five More than demand one year years five years Non-derivative financial instruments Cash reserve 184,967 184,967 0 0 0 Claims on banks 5,894,275 1,067,915 2,260,824 2,588,885 201,536 Claims on customers 237,538 236,523 1,015 0 0 Financial investments 4,670,995 0 959,770 3,909,891 80,143 Total 10,987,775 1,489,405 3,221,609 6,498,776 281,679 thousand Remaining lifetimes as of 31 December 2009 Book value Due on Up to One to five More than demand one year years five years Non-derivative financial instruments Cash reserve 282,827 282,827 0 0 0 Claims on banks 4,761,021 728,480 4,115,552 0 0 Claims on customers 206,199 205,132 1,067 0 0 Financial investments 4,478,973 0 1,544,833 3,087,645 96,143 Total 9,729,020 1,216,439 5,661,452 3,087,645 96,143
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 109 Payment obligations under financial liabilities in accordance with contractually agreed maturities thousand Remaining lifetimes as of 31 December 2010 Book value Due on Up to One to five More than demand one year years five years Non-derivative financial liabilities Liabilities to customers 10,368,068 9,423,183 524,406 379,970 114,121 Liabilities to banks 40,779 40,779 0 0 0 Derivative financial liabilities Negative fair values from derivative hedging instruments 38 0 455 1,495 0 Credit obligations 0 2,951,663 0 0 0 Total 10,408,885 12,415,625 524,861 381,465 114,121 thousand Remaining lifetimes as of 31 December 2009 Book value Due on Up to One to five More than demand one year years five years Non-derivative financial liabilities Liabilities to customers 9,124,792 8,189,673 451,807 541,387 2,753 Liabilities to banks 923 923 0 0 0 Derivative financial liabilities Negative fair values from derivative hedging instruments 0 0 0 0 0 Credit obligations 0 2,951,293 0 0 0 Total 9,125,715 11,141,889 451,807 541,387 2,753 The risk report contains further details on the extent and causes of the liquidity risk, on risk management, quantification and reporting and information on the current risk situation.
110 Market risk Market price risks encompass the risk of loss from changes in market parameters (in particular interest rates, credit spreads, exchange rates and share prices). The statistical/mathematical approach of historic simulation to calculate the value-at-risk values is used to quantify and monitor general market price risks on a daily basis. The value-at-risk describes the maximum loss under normal market conditions for a specific probability (confidence level) and specific holding period. The underlying statistical parameters are based on a historic monitoring period of the past 255 trading days, a holding period of one day and a confidence level of 97.5%. The key feature of the historic simulation is that it does not use a parametric model for the risk factors. Historic market data and its empirical distribution function is used directly. A portfolio value is obtained for every day of the historic monitoring period. For a monitoring period of 255 days, a confidence level of 97.5% and a holding period of one day, the value-at-risk is the seventh highest daily loss in the historic monitoring period. The variance/covariance approach, also with a confidence level of 97.5% and a holding period of one day, is used to quantify and monitor the specific market price risks (credit spreads). The model parameters are credit spread sensitivities, volatilities and correlations. These are determined by historic market data. The two value-at-risk figures from the general and specific market price risk are combined to form an overall value-at-risk by assuming a correlation of zero between credit spreads and risk factors in the general market price risk. Stress tests are carried out at comdirect bank AG to monitor extreme market movements. The stress figure shows the maximum portfolio loss under worst case conditions. The respective maximum losses in the scenarios for the share price, interest rate and foreign currency risk factors are added together. This aggregate figure is combined with the maximum loss in the credit spread scenarios on the assumption that these are uncorrelated to form the overall stress value. Market risks thousand As of end of previous As of end of year Year high Year low Median 2010 Median 2009 year Total VaR* 97.5% Holding period 1 day 5,096 2,745 5,064 2,007 3,971 5,986 Stress test overall result 19,398 14,886 19,730 14,861 17,508 23,292 * In Q4 2010, there was a change in measuring the VaR for the specific market risk analoguous to the method applied to general market risks to the method of historic simulation. The risk report contains further details on the extent and causes of the market risk, on quantification and management and information on the current risk situation.
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 111 (57) Fair Value of financial instruments The table below shows the fair values of balance sheet items compared to their book values. The fair value is the amount for which an asset can be exchanged or a liability settled between knowledgeable, willing partners in an arm s length transaction. Where stock market prices were available, these were used for the measurement of financial instruments. In the event that no market price was available, measurements were carried out using internal measurement models with current market price parameters. In this connection, the net present value method was used in particular. thousand Fair value Book value 31.12.2010 31.12.2009 31.12.2010 31.12.2009 Loans and receivables Cash reserve 184,967 282,827 184,967 282,827 Claims on banks 5,905,856 4,777,932 5,894,275 4,761,021 Claims on customers after provisions 235,858 204,039 235,858 204,039 Total 6,326,681 5,264,798 6,315,100 5,247,887 Available for sale financial assets Financial investments 4,670,995 4,478,973 4,670,995 4,478,973 Total 4,670,995 4,478,973 4,670,995 4,478,973 Liabilities measured at Amortised cost Liabilities to customers 10,368,295 9,136,821 10,368,068 9,124,792 Liabilities to banks 40,779 923 40,779 923 Total 10,409,074 9,137,744 10,408,847 9,125,715 Other Negative fair values from derivative hedging instruments 38 0 38 0 For short-term claims on banks of 2,685,641 thousand (2009: 3,177,271 thousand), short-term claims on customers of 235,858 thousand (2009: 204,039 thousand), short-term liabilities to banks of 40,779 thousand (2009: 923 thousand) and short-term liabilities to customers of 9,692,399 thousand (2009: 8,583,073 thousand), the fair value was equated to the book value for simplification purposes.
112 (58) Fair Value hierarchy The following table contains the full portfolio of financial instruments that have been valued at fair value. The fair values are also classified into three levels: Level 1: Prices quoted in active markets (not adjusted) for identical assets or liabilities. Level 2: Exemplary prices calculated with the exception of the quoted prices included in Level 1, which can be observed for assets or liabilities either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 3: Exemplary prices calculated for assets or liabilities, which are not based on observable market data (non-observable input data). thousand 31.12.2010 Total Level 1 Level 2 Level 3 Available for sale financial assets Financial investments 4,670,968 1,678,189 2,992,779 0 Other Negative fair values from derivative instruments 38 0 38 0 Total 4,671,006 1,678,189 2,992,817 0 thousand 31.12.2009 Total Level 1 Level 2 Level 3 Available for sale financial assets Financial investments 4,478,946 1,969,802 2,509,144 0 Other Negative fair values from derivative instruments 0 0 0 0 Total 4,478,946 1,969,802 2,509,144 0 There were no significant transfers of financial instruments between Level 1 and Level 2 of the fair value hierarchy.
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 113 (59) Net result from financial instruments The following table shows the net result before income tax per financial instrument category within the meaning of IAS 39. thousand 31.12.2010 31.12.2009 Loans and receivables Interest income 96,711 132,617 Provisions for possible loan losses 255 1,299 Net result 96,456 133,916 Available for sale financial assets Fair value changes (recognised in equity) 18,664 104,130 Valuation results reposted from the revaluation reserve to the income statement 414 5,926 Results of sales reposted from the revaluation reserve to the income statement 10,333 26,776 Sub-total: change in revaluation reserve before tax 28,583 83,280 Interest income 113,535 131,443 Dividends and similar income 1,033 1,805 Results from financial investments 9,919 20,850 Change in hedged fair value from hedging instruments 122 0 Net result 95,782 237,378 Liabilities measured at amortised cost Interest expenses 109,143 157,172 Net result 109,143 157,172 At fair value through profit or loss: held for trading Trading result 0 836 Net result 0 836 Other: derivative hedging instruments Net interest income 64 0 Change in fair value from hedging instruments 100 0 Net result 36 0
114 (60) Average number of employees during the reporting period 2010 2009 Change Total Female Male Total Female Male (Total) in % At comdirect bank AG 894 443 451 840 432 408 6.5 in the call centre 338 192 146 361 199 163 6.5 in the back office 132 97 35 142 106 37 7.3 in other areas 424 154 270 336 127 209 26.2 At ebase GmbH 239 149 90 257 165 92 7.0 Average number of employees during the reporting period 1,133 592 541 1,097 596 501 3.3 The employee details listed above include full-time and part-time staff. The number of employees does not include the average number of trainees in the group in financial year 2010. 2010 2009 Change Total Female Male Total Female Male (Total) in % Trainees 23 13 10 30 20 10 22.5
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 115 (61) Income statement of comdirect group according to IAS/IFRS year-to-year comparison thousand 1.1. to 31.12.2010 1.1. to 31.12.2009 1.1. to 31.12.2008 1.1. to 31.12.2007 1.1. to 31.12.2006 Interest income 211,280 265,865 482,303 287,744 143,057 Interest expenses 109,206 157,172 318,898 160,580 54,324 Net interest income before provisions 102,074 108,693 163,405 127,164 88,733 Provisions for possible loan losses 255 1,299 1,172 1,947 3,377 Net interest income after provisions 101,819 109,992 162,233 125,217 85,356 Commission income 281,227 248,539 314,475 185,595 164,291 Commission expenses 108,455 99,782 137,441 32,871 27,726 Net commission income 172,772 148,757 177,034 152,724 136,565 Result from hedge accounting 22 0 133 56 45 Trading result 0 836 540 519 317 Result from financial investments 9,919 20,850 19,294 9,624 6,327 Administrative expenses 210,028 198,918 242,774 187,437 135,626 Personnel expenses 62,563 62,341 58,795 39,677 33,069 Other administrative expenses 133,404 124,201 171,836 137,626 92,828 Marketing expenses 53,021 41,441 80,210 74,268 40,320 Communication expenses 4,353 7,022 8,810 5,277 2,104 Consulting expenses 7,334 11,702 14,019 12,754 10,357 Expenses for external services 30,258 25,435 30,347 22,629 21,323 Sundry administrative expenses 38,438 38,601 38,450 22,698 18,724 Depreciation of office furniture and equipment and intangible assets 14,061 12,376 12,143 10,134 9,729 Other operating result 6,414 3,421 5,148 10,063 5,994 Operating result 80,874 84,938 82,754 90,480 85,600 Restructuring expenses 0 8,945 0 0 0 Pre-tax profit/profit from ordinary activities 80,874 75,993 82,754 90,480 85,600 Taxes on income 21,240 19,369 21,916 32,783 28,598 Net profit 59,634 56,624 60,838 57,697 57,002 Statement of comprehensive income of comdirect group according to IAS/IFRS year-on-year comparison thousand 1.1. to 31.12.2010 1.1. to 31.12.2009 1.1. to 31.12.2008 1.1. to 31.12.2007 1.1. to 31.12.2006 Net profit 59,634 56,624 60,838 57,697 57,002 Change in the revaluation reserve before tax 28,583 83,280 2,504 4,482 6,414 Taxes 7,708 21,659 363 249 3,587 Change in the revaluation reserve after tax 20,875 61,621 2,867 4,233 2,827 Comprehensive income/loss for the reporting period 38,759 118,245 57,971 53,464 54,175 The figures for financial year 2008 were adjusted to account for the contributions from ebase GmbH. Financial years 2006 to 2007 are presented as reported in the respective annual reports of the comdirect group.
116 (62) Income statement of comdirect group according to IAS/IFRS on a quarterly comparison 2010 thousand Q1 Q2 Q3 Q4 Interest income 49,193 51,084 53,962 57,041 Interest expenses 25,220 28,457 27,744 27,785 Net interest income before provisions 23,973 22,627 26,218 29,256 Provisions for possible loan losses 79 178 392 394 Net interest income after provisions 23,894 22,449 25,826 29,650 Commission income 65,674 71,591 66,243 77,719 Commission expenses 26,883 26,298 26,116 29,158 Net commission income 38,791 45,293 40,127 48,561 Result from hedge accounting 0 4 10 8 Trading result 0 0 0 0 Result from financial investments 6,136 1,991 2,552 760 Administrative expenses 48,625 50,584 48,025 62,794 Personnel expenses 15,385 15,295 15,029 16,854 Other administrative expenses 29,924 31,663 29,511 42,306 Marketing expenses 10,914 12,507 10,632 18,968 Communication expenses 359 1,538 1,000 1,456 Consulting expenses 1,727 1,404 1,653 2,550 Expenses for external services 6,876 7,662 7,717 8,003 Sundry administrative expenses 10,048 8,552 8,509 11,329 Depreciation of office furniture and equipment and intangible assets 3,316 3,626 3,485 3,634 Other operating result 986 1,381 796 3,251 Operating result 21,182 20,526 21,266 17,900 Restructuring expenses 0 0 0 0 Pre-tax profit/profit from ordinary activities 21,182 20,526 21,266 17,900 Taxes on income 5,500 5,399 5,895 4,446 Net profit 15,682 15,127 15,371 13,454 Statement of comprehensive income of comdirect group according to IAS/IFRS on a quarterly comparison 2010 thousand Q1 Q2 Q3 Q4 Net profit 15,682 15,127 15,371 13,454 Change in the revaluation reserve before tax 19,722 32,882 13,165 28,588 Taxes 4,977 8,446 3,311 7,550 Change in the revaluation reserve after tax 14,745 24,436 9,854 21,038 Comprehensive income/loss for the reporting period 30,427 9,309 25,225 7,584
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 117 2009 thousand Q1 Q2 Q3 Q4 Interest income 93,714 66,520 54,907 50,724 Interest expenses 61,066 38,955 31,855 25,296 Net interest income before provisions 32,648 27,565 23,052 25,428 Provisions for possible loan losses 477 25 402 1,349 Net interest income after provisions 32,171 27,590 23,454 26,777 Commission income 57,736 58,842 63,544 68,417 Commission expenses 23,259 22,266 25,471 28,786 Net commission income 34,477 36,576 38,073 39,631 Result from hedge accounting 0 0 0 0 Trading result 683 1,367 1,520 0 Result from financial investments 1,714 7,381 11,337 3,846 Administrative expenses 52,738 48,689 48,710 48,781 Personnel expenses 15,110 14,202 17,270 15,759 Other administrative expenses 34,421 31,205 28,687 29,888 Marketing expenses 12,965 9,822 8,515 10,139 Communication expenses 1,931 1,863 1,081 2,147 Consulting expenses 3,158 3,041 2,909 2,594 Expenses for external services 7,014 6,573 6,143 5,705 Sundry administrative expenses 9,353 9,906 10,039 9,303 Depreciation of office furniture and equipment and intangible assets 3,207 3,282 2,753 3,134 Other operating result 4,897 2,280 830 2,926 Operating result 17,776 23,771 24,844 18,547 Restructuring expenses 0 0 0 8,945 Pre-tax profit/profit from ordinary activities 17,776 23,771 24,844 9,602 Taxes on income 5,047 5,542 6,294 2,486 Net profit 12,729 18,229 18,550 7,116 Statement of comprehensive income of comdirect group according to IAS/IFRS on a quarterly comparison 2009 thousand Q1 Q2 Q3 Q4 Net profit 12,729 18,229 18,550 7,116 Change in the revaluation reserve before tax 15,478 15,734 63,955 19,069 Taxes 4,004 4,179 16,152 5,332 Change in the revaluation reserve after tax 11,474 11,555 47,803 13,737 Comprehensive income/loss for the reporting period 1,255 29,784 66,353 20,853
118 (63) Segment reporting by business line 1.1. to 31.12.2010 thousand B2C B2B comdirect group total Interest income 210,595 685 211,280 Interest expenses 108,263 943 109,206 Net interest income before provisions 102,332 258 102,074 Provisions for possible loan losses 255 0 255 Net interest income after provisions 102,077 258 101,819 Commission income 145,061 136,166 281,227 Commission expenses 14,437 94,018 108,455 Net commission income 130,624 42,148 172,772 Result from hedge accounting 22 0 22 Trading result 0 0 0 Result from financial investments 9,857 62 9,919 Administrative expenses 175,933 34,095 210,028 Other operating result 6,021 393 6,414 Operating result 72,624 8,250 80,874 Restructuring expenses 0 0 0 Pre-tax profit/profit from ordinary activities 72,624 8,250 80,874 Segment investments 8,147 4,302 12,449 Segment depreciation 11,107 2,954 14,061 Cost/income ratio 70.7% 80.5% 72.1% Segment income 376,396 140,248 of which external income 376,359 140,223 of which inter-segmental income 37 25 Segment expenses 303,772 131,998 Segment assets 10,728,669 Segment debt 10,206,847 The management manages the comdirect group via two business lines: Business to Customer (B2C) and Business to Business (B2B). The B2C business line is comprised of comdirect bank AG and its five separate assets; ebase GmbH is comprised of the B2B business line. The segmentation carried out reflects the internal perspective of the comdirect group and corresponds to the management approach. The respective customer groups in particular constitute the main delimitation feature of the business segments. The figures for the B2B business segment were derived from the internal reporting of ebase GmbH and correspond to the contributions of ebase GmbH included in the income statement of the comdirect group. In the comdirect group, net interest income is essentially generated by reinvesting customer deposits in the money and capital markets, whereby Commerzbank is a major business partner (see information on related party disclosures, note (26)). The interest income from money and capital market transactions in the amount of 110.9m exceeds 10% of the total income for the segments. This was earned almost exclusively in the B2C business line.
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 119 1.1. to 31.12.2009 thousand B2C B2B comdirect group total Interest income 265,272 593 265,865 Interest expenses 156,904 268 157,172 Net interest income before provisions 108,368 325 108,693 Provisions for possible loan losses 1,299 0 1,299 Net interest income after provisions 109,667 325 109,992 Commission income 133,860 114,679 248,539 Commission expenses 22,231 77,551 99,782 Net commission income 111,629 37,128 148,757 Result from hedge accounting 0 0 0 Trading result 836 0 836 Result from financial investments 21,022 172 20,850 Administrative expenses 166,692 32,226 198,918 Other operating result 2,060 1,361 3,421 Operating result 78,522 6,416 84,938 Restructuring expenses 4,496 4,449 8,945 Pre-tax profit/profit from ordinary activities 74,026 1,967 75,993 Segment investments 9,945 2,618 12,563 Segment depreciation 9,642 2,734 12,376 Cost/income ratio 68.3% 83.4% 70.4% Segment income 444,251 123,573 of which external income 444,251 123,573 of which inter-segmental income 0 0 Segment expenses 370,225 121,606 Segment assets 9,478,005 Segment debt 9,083,404 Net commission income in the B2C segment results predominantly from custody account business with private customers. In addition, commission is generated from payment services and other commission, e.g. from advisory services. In the B2C business segment impairments on financial investments amounting to 345 thousand were necessary (2009: 5,621 thousand). Material cash income resulted from deferred interest. Non-cash income totalled 82.1m (2009: 69.5m). Cash expenses mainly stemmed from depreciations, allocations to provisions, recognition of other liabilities and deferred interest in customer business. Non-cash expenses totalled 60.3m (2009: 53.2m). In the B2B business line, net commission income is generated from securities services for institutional and private customers. Other sources of income, such as deposit business, are not material. Impairments on financial assets of 69 thousand were taken into account (2009: 312 thousand).
120 Material non-cash income resulted from deferred commission. Non-cash income totalled 33.8m (2009: 13.7m). Non-cash expenses mainly stemmed from allocations to provisions. Non-cash expenses totalled 31.7m (2009: 9.2m). There were no material service agreements between the business segments shown during the reporting period. We therefore waive to display a consolidation column. The segment income and expenses reported relates to IFRS values and therefore correspond to the values stated in the consolidated income statement. The Treasury volume and credit volume are deemed to be segment assets of the B2C business line. No assets are shown for the B2B business line as these do not form part of internal reporting for management purposes. The Treasury volume of the B2C segment comprises the ECB credit balance, money market transactions, promissory notes and the securities portfolio of comdirect bank AG. Unlike the accounting treatment, for the purposes of internal reporting promissory notes are measured at fair value. Like customer deposits, the Treasury volume increased in the reporting period. The credit volume in the B2C business line comprises lending to customers, particularly on loans against securities. B2C segment assets in the amount of 10,729m (2009: 9,478m) differs from the consolidated balance sheet total according to IFRS in the amount of 11,040m (2009: 9,785m) particularly due to the valuation effects on claims in the amount of 8m (2009: 15m), deferred interest and fees in the amount of 64m (2009: 50m) and the contribution of balance sheet items not allocated to the B2C segment assets and consolidation in the amount of 255m (2009: 271m). The customer deposits managed by comdirect bank AG are stated as segment liabilities of the B2C business line. Segment debt in the amount of 10,206m (2009: 9,083m) differs from the liabilities to customers reported in the consolidated balance sheet according to IFRS in the amount of 10,368m (2009: 9,125m) due to valuation effects in the amount of 2m (2009: 1m) and the contributions of ebase GmbH and consolidation effects in the total amount of 160m (2009: 41m).
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 121 (64) Other liabilities thousand 31.12.2010 31.12.2009 31.12.2010 31.12.2009 31.12.2010 31.12.2009 Up to one year Up to one year More than one year up More than one year up More than five years More than five years to five years to five years Rental payments 3,476 4,904 13,198 13,048 4,771 1,626 Lease payments 444 566 273 868 0 0 Total 3,920 5,470 13,471 13,916 4,771 1,626 The above table contains minimum lease payments under non-cancellable operating leases. (65) Fees for auditors The financial year saw overall expenses of 785 thousand (net without V.A.T.) for the services rendered by auditors PricewaterhouseCoopers AG Wirtschaftsprüfungsgesellschaft. thousand 31.12.2010 31.12.2009 Change in % Annual audits 330 417 20.9 Other certification services 175 180 2.8 Tax advisory services 263 251 4.8 Other services 17 161 89.4 Total 785 1,009 22.2 (66) Corporate Governance Code comdirect bank AG has submitted the Declaration of Compliance with the German Corporate Governance Code pursuant to Section 161 of the German Stock Corporation Act (AktG) and has made it permanently available to shareholders on its website www.comdirect.de.
122 (67) The company s Boards Supervisory Board Martin Zielke Chairman Member of the Board of Managing Directors of Commerzbank AG, Frankfurt/Main Dr. Achim Kassow Deputy Chairman Member of the Board of Managing Directors of Commerzbank AG, Frankfurt/Main Frank Annuscheit Member of the Board of Managing Directors of Commerzbank AG, Frankfurt/Main Thorben Gruschka Deputy Works Council Chairman of comdirect bank AG, Staff member IT Support department of comdirect bank AG, Quickborn Board of Managing Directors Dr. Thorsten Reitmeyer CEO (from 1 December 2010) Dr. Christian Diekmann Member of the Board of Managing Directors Carsten Strauß Member of the Board of Managing Directors Michael Mandel CEO (until 30 November 2010) Alexander Boldyreff Member of the Board of Managing Directors (until 31 October 2010) Angelika Kierstein Works Council Chairwoman of comdirect bank AG, Department Support Finance, Controlling & Risk Management at comdirect bank AG, Quickborn Georg Rönnberg Certified accountant and tax consultant Neu-Anspach (from 7 May 2010) Klaus Müller-Gebel Deputy Chairman Lawyer, Frankfurt/Main (until 7 May 2010)
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 123 (68) Seats on supervisory boards and other executive bodies Members of the Supervisory Board of comdirect bank AG Martin Zielke Seats on comparable supervisory bodies BRE Bank SA, Warsaw Commerzbank Auslandsbanken Holding Nova GmbH, Frankfurt/Main Deputy Chairman Public Joint Stock Company Bank Forum, Kiew (from 28 April 2010) Dr. Achim Kassow Seats on statutory supervisory boards Commerzbank Auslandsbanken Holding AG, Frankfurt/Main, Chairman Generali Deutschland Holding AG, Cologne (until 31 December 2010) Seats on comparable supervisory bodies Allianz Global Investors Deutschland GmbH, Munich (until 31 December 2010) BRE Bank SA, Warsaw Klaus Müller-Gebel Seats on statutory supervisory boards Deutsche Schiffsbank AG, Bremen/Hamburg Deputy Chairman Eurohypo AG, Eschborn Deputy Chairman Members of the Board of Managing Directors of comdirect bank AG Dr. Thorsten Reitmeyer Seats on statutory supervisory boards Commerz Real AG, Eschborn (until 31 December 2010) Commerz Real Investmentgesellschaft mbh, Wiesbaden (until 31 December 2010) Seats on comparable supervisory bodies Commerzbank International S.A., Luxembourg Chairman (until 9 December 2010) European Bank for Fund Services GmbH (ebase), Aschheim Dr. Christian Diekmann Seats on statutory supervisory boards comdirect private finance AG, Quickborn (until 25 June 2010) Seats on comparable supervisory bodies European Bank for Fund Services GmbH (ebase), Aschheim Chairman Carsten Strauß Seats on comparable supervisory bodies Commerz Direktservice GmbH, Duisburg European Bank for Fund Services GmbH (ebase), Aschheim Michael Mandel Seats on statutory supervisory boards comdirect private finance AG, Quickborn Deputy Chairman (until 25 June 2010) Seats on comparable supervisory bodies Commerz Direktservice GmbH, Duisburg Chairman European Bank for Fund Services GmbH (ebase), Aschheim Deputy Chairman Alexander Boldyreff Seats on statutory supervisory boards comdirect private finance AG, Quickborn Chairman (until 25 June 2010) Seats on comparable supervisory bodies European Bank for Fund Services GmbH (ebase), Aschheim (until 31 October 2010)
124 (69) Remuneration and loans to Board members Remuneration for the Board of Managing Directors The remuneration for the Board of Managing Directors of comdirect bank AG is set by the Supervisory Board. In addition to the non-performance-related fixed compensation comprising the annual fixed salary and fringe benefits, the compensation comprises a variable compensation component linked to the performance of the company and personal performance as well as a component with long-term incentive effect and risk elements. In addition, the members of the Board of Managing Directors also receive a company pension for their activities at comdirect bank AG. Taking into account commercial law regulations, compensation for the members of the Board of Managing Directors of 1,590 thousand (2009: 1,723 thousand) was reported in financial year 2010. This includes payments due in the short term and the values for the performance shares granted in the financial year. The figures for the previous year include contributions to members of the Board of Managing Directors who left the company in financial year 2009. Changes in the Board of Managing Directors Michael Mandel resigned as CEO with effect from the end of 30 November 2010. He received payments from comdirect up until his resignation. As part of the rescission (severance) agreement, the claims arising from the variable compensation system continue to remain in force on a pro-rated basis and will be paid out after it has been determined by the Supervisory Board that the defined performance targets have been achieved. In addition, a one-off payment in the amount of 55 thousand was agreed on. The variable compensation and one-off payment are shown in the following table in the Variable Components column. Dr. Thorsten Reitmeyer was appointed to the Board of Managing Directors as CEO for a period of three years with effect from 1 December 2010. Alexander Boldyreff resigned from the Board of Managing Directors with effect from the end of 31 October 2010. He received payments from comdirect up until his resignation. As part of the rescission agreement, claims arising from the variable compensation system were settled on a pro-rated basis with a one-off payment. The one-off payment is shown in the following table in the Variable Components column. Short-term benefits The members of the Board of Managing Directors of comdirect bank AG received the following remuneration for financial year 2010: thousand Non-variable Value of fringe Variable Total components benefits components 1) 2010 2009 2010 2009 2010 2009 2010 2009 Dr. Thorsten Reitmeyer (from 1 December 2010) 30 0 3 0 32 0 65 0 Dr. Christian Diekmann (from 1 May 2009) 170 114 6 65 156 104 332 283 Carsten Strauß 145 145 5 15 174 203 324 363 Michael Mandel (until 30 November 2010) 202 220 7 24 337 364 546 608 Alexander Boldyreff (from 1 July 2009 until 31 October 2010) 167 100 2 1 75 59 244 160 Total 714 579 23 105 774 730 1,511 1,414 1) Payable in the following year subject to adoption of the annual financial statements. In financial year 2010, expenses were recorded in the income statement for the variable components for Dr. Reitmeyer 34 thousand, Dr. Diekmann 164 thousand, Mr Strauß 183 thousand, Mr Mandel 378 thousand and Mr Boldyreff 75 thousand. Share-based payment Long Term Incentive Programme The components with long-term incentive effect and risk elements in financial year 2010 are based on the Long Term Incentive Programme (LTIP), the model replacing the stock option programme (see note (25)). As beneficiaries
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 125 under the LTIP, members of the Board of Managing Directors began receiving a conditional allocation of virtual, non-tradeable shares (performance shares) in yearly tranches since 2005. These comprise the conditional right to a cash payment after a three year waiting period. As of the reporting date, the members of the Board of Managing Directors held the following number of performance shares: Value per Dr. Carsten Michael Total share Christian Strauß Mandel in Euro Diekmann Allocated performance phares Tranche 2008 0 8,352 13,751 22,103 Tranche 2009 8,436 7,179 10,892 26,507 Tranche 2010 7,077 6,022 0 13,099 Total 15,513 21,553 24,643 61,709 Value when granted Tranche 2008 in 4.00 in thousand 0 33 55 88 Tranche 2009 in 5.05 in thousand 43 36 55 134 Tranche 2010 in 6.02 in thousand 43 36 0 79 Total 86 105 110 301 Value as of the reporting date Tranche 2008 in 10.85 in thousand 0 91 149 240 Tranche 2009 in 7.35 in thousand 62 53 80 195 Tranche 2010 in 5.57 in thousand 39 34 0 73 Total 101 178 229 508 Recorded as expense in the financial year 2009 Tranche 2008 in thousand 0 18 30 48 Tranche 2009 in thousand 1 1 2 4 Tranche 2010 in thousand 0 0 0 0 Total 1 19 32 52 Recorded as expense in the financial year 2010 Tranche 2008 in thousand 0 44 72 116 Tranche 2009 in thousand 21 18 27 66 Tranche 2010 in thousand 1 1 0 2 Total 2010 22 63 99 184 The realisable compensation from participation in the LTIP may vary considerably from the figures in the table above and in particular may not apply at all as the final amounts for disbursement are not determined until the end of the term (blocking period) of the respective tranches. The Supervisory Board resolved to exclude Dr. Reitmeyer from the 2010 tranche of the LTIP. Owing to their resignations from the Board of Managing Directors, Michael Mandel and Alexander Boldyreff were not allocated any performance shares in the financial year. While the performance share issued to Mr Boldyreff in the previous years lapsed, Mr Mandel s claims to the performance shares granted to him in the previous years do not lapse, due to his internal move within Commerzbank Group. Over the coming years, further payments could become due from the remaining tranches. One tranche under the LTIP became due in 2010. Thereby the payments to Mr Strauß ( 18 thousand) relate to payouts of performance shares he received in financial year 2007 in his capacity as divisional manager of the bank.
126 Post-employment benefits The members of the Board of Managing Directors receive a pension commitment for their activities at comdirect bank AG. Accordingly, members of the Board of Managing Directors who were active as of the balance sheet date, are eligible for a claim to a capital payment. The company has formed pension provisions under IFRS for these future claims, the amount of which depends on the length of service, pensionable salary and current actuarial interest rate. The valuation is based on actuarial assessments, using the projected unit credit method, which are conducted by an independent actuary. As a result of the changes in the Board of Managing Directors, Michael Mandel s pension claims were transferred to Commerzbank AG; conversely, comdirect assumed the pension claims earned by Dr. Reitmeyer at Commerzbank AG. Alexander Boldyreff s pension claims even remain in force after his resignation. The pension obligations towards active members of the Board of Managing Directors who were active during the financial year developed as follows: thousand Dr. Thorsten Reitmeyer Dr. Christian Diekmann Carsten Strauß Michael Mandel Alexander Boldyreff 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 Pension obligation under IFRS (DBO) as of 1 January 0 0 7 0 17 7 191 132 7 0 Change in financial year 87 0 13 7 13 10 191 59 16 7 of which transfer due to intra-group change 85 0 0 0 0 0 224 0 0 0 of which service cost recognised in income statement 2 0 12 0 10 9 24 21 15 0 Pension obligation under IFRS (DBO) as of 31 December 87 0 20 7 30 17 0 191 23 7 Regulations governing termination of employment If comdirect bank prematurely terminates the appointment to the Board of a member of the Board of Managing Directors, the respective contract of employment is in principle continued until the end of the original term of office. The compensation for the member of the Board of Managing Directors released from office continues to be paid for the remaining term of the contract of employment. For Mr Strauß and Dr. Diekmann, the fixed compensation will be paid the full amount for Mr Strauß, while Dr. Diekmann will receive payments in the amount of 50% of the fixed compensation for a maximum of 24 months. Dr. Reitmeyer will receive a payment not exceeding an amount of up to two of his annual compensations, calculation based on the compensation he received during the last full financial year prior to the termination of his appointment. There is no entitlement to further remuneration provided the termination takes place for good cause. There may be a settlement in the event of premature termination of employment resulting from an individually agreed-upon rescission agreement. In the past financial year, no member of the Board of Managing Directors has received payments, considerations or corresponding commitments from a third party in relation to their activities as a member of the Board of Managing Directors. Members of the Board of Managing Directors performing board functions at subsidiaries or affiliated companies only received reimbursement of expenses. Information relating to former members of the Board of Managing Directors The bank provides old-age provision for former members of the Board of Managing Directors or their surviving dependents. As of the balance sheet date, pension obligations under IFRS (defined benefit obligations) for former members of the Board of Managing Directors amounted to 3,405 thousand (2009: 3,230 thousand).
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 127 In financial year 2010, a total of 347 thousand (2009: 263 thousand) was paid to former members of the Board of Managing Directors of comdirect bank AG. In 2010 a payment made to former members of the Board of Managing Directors under the LTI programme amounted to 149 thousand (2009: 64 thousand). Until 2012 further payments from the remaining tranches of the LTI plan to former members of the Board of Managing Directors are possible. Remuneration for the Supervisory Board The compensation of the Supervisory Board members is stipulated in the Articles of Association. In addition to a fixed compensation, the compensation scheme includes a separate component for committee activities and a variable component, which depends on the amount of the dividend to be distributed. Provided that the financial statements of comdirect bank AG are adopted in their present form and that the annual general meeting approves the proposed appropriation of profit, the remuneration of members of the Supervisory Board will total 278 thousand (2009: 275 thousand). The remuneration breakdown by the Supervisory Board members is as follows: thousand Non-variable Variable Remuneration for Total components components committee activities 2010 2009 2010 2009 2010 2009 2010 2009 Martin Zielke (Chairman) 18 12 24 16 12 6 54 34 Dr. Achim Kassow (Deputy Chairman) 34 36 45 47 25 27 104 110 Frank Annuscheit 10 10 13 13 0 0 23 23 Torben Gruschka (from 6 May 2009) 12 8 16 10 0 0 28 18 Angelika Kierstein 12 12 16 16 3 3 31 31 Georg Rönnberg (from 7 May 2010) 8 0 10 0 2 0 20 0 Klaus Müller-Gebel (until 7 May 2010) 6 18 9 23 3 9 18 50 Mitja Sack (until 6 May 2009) 0 4 0 5 0 0 0 9 Neither advance payments nor loans were extended. comdirect bank AG did not take on any contingent liabilities. (70) Holdings Affiliated companies included in the consolidated financial statements: Name Domicile Share of capital held Equity in % in thousand European Bank for Fund Services GmbH (ebase) Aschheim/Germany 100.0 29,575 SPEs (special funds) included in the consolidated financial statements as per IAS 27/SIC-12: Name Domicile/Registered office of the management company Share of capital held in % Funds volume in thousand CDBS-Cofonds Frankfurt/Main, Germany 100.0 99,658 CDBS-Cofonds II Frankfurt/Main, Germany 100.0 91,421 CDBS-Cofonds III Frankfurt/Main, Germany 100.0 96,173 CDBS-Cofonds IV Frankfurt/Main, Germany 100.0 98,076 OP-Fonds CDBS V Cologne/Germany 100.0 89,029 Other affiliated companies not included in the consolidated financial statements: Name Domicile Share of capital held Equity in % in thousand WST-Broker GmbH Frankfurt/Main, Germany 54.0 311
128 > Declaration of the Board of Managing Directors To the best of our knowledge, and in accordance with the applicable reporting principles, the consolidated financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the group, and the group management report includes a fair review of the development and performance of the business and the position of the group, together with a description of the principal opportunities and risks associated with the expected development of the group. Quickborn, 18 February 2011 The Board of Managing Directors Dr. Thorsten Reitmeyer Dr. Christian Diekmann Carsten Strauß
FOREWORD INTERVIEW CORPORATE GOVERNANCE GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS 129 > Auditor s report We have audited the consolidated financial statements prepared by the comdirect bank Aktiengesellschaft, Quickborn, comprising the balance sheet, income statement and statement of comprehensive income, statement of changes in equity, cash flow statement and the notes to the consolidated financial statements, together with the group management report for the business year from January 1 to December 31, 2010. The preparation of the consolidated financial statements and the group management report in accordance with the IFRSs, as adopted by the EU, and the additional requirements of German commercial law pursuant to (Article) 315a Abs. (paragraph) 1 HGB ( Handelsgesetzbuch : German Commercial Code) is the responsibility of the parent Company s Board of Managing Directors. Our responsibility is to express an opinion on the consolidated financial statements and on the group management report based on our audit. We conducted our audit of the consolidated financial statements in accordance with 317 HGB and German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer (Institute of Public Auditors in Germany) (IDW). Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the consolidated financial statements in accordance with the applicable financial reporting framework and in the group management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Group and expectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the consolidated financial statements and the group management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the annual financial statements of the companies included in consolidation, the determination of the companies to be included in consolidation, the accounting and consolidation principles used and significant estimates made by the Company s Board of Managing Directors, as well as evaluating the overall presentation of the consolidated financial statements and the group management report. We believe that our audit provides a reasonable basis for our opinion. Our audit has not led to any reservations. In our opinion based on the findings of our audit the consolidated financial statements comply with the IFRSs, as adopted by the EU, and the additional requirements of German commercial law pursuant to 315a Abs. 1 HGB and give a true and fair view of the net assets, financial position and results of operations of the Group in accordance with these provisions. The Group management report is consistent with the consolidated financial statements and as a whole provides a suitable view of the Group s position and suitably presents the opportunities and risks of future development. Hamburg, 18 February 2011 PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft Gero Martens Wirtschaftsprüfer (German Public Auditor) ppa. Uwe Gollum Wirtschaftsprüfer (German Public Auditor)
130 > Glossary Accounting Law Reform Act (BilMoG) Reform of commercial code accounting law in 2009. The aim of the reform is to align German accounting regulations with international accounting standards. Accruals Sub-category of financial liabilities according to IFRS. They are distinguishable from provisions by a significantly higher degree of certainty in terms of amount or time of settlement obligation. Act on the Appropriateness of Management Board Compensation (VorstAG) Amendment of the German Stock Corporation Act in the wake of the financial market crisis. The regulations are intended to provide incentives for sustainable company development, for example by making it easier to cut salaries of management board members if the company s situation deteriorates. Advanced Internal Ratings Based Approach (AIRB) Advanced approach to calculating the minimum capital requirement for credit risk. Advanced Measurement Approach (AMA) Advanced measurement approach for operational risk according to the equity regulations under Basel II. Available-for-sale IAS 39 classification which describes financial instruments available to sell immediately. Available net liquidity concept Instrument used to manage liquidity risk. The available net liquidity is determined and monitored for both a basic scenario taking account of current market conditions as well as stress scenarios. Banking book All balance sheet and off-balance sheet items of a bank that cannot be allocated to the trading book. Basel II Capital Accord published by the Basel Committee on Banking Supervision which stipulates how much equity banks require to cover risks, which methods should be used to assess risks and how risks are to be published. The Accord also defines standards for the risk management of banks and its appraisal by the banking supervisory authority. Basel III Additional regulations published by the Basel Committee on Banking Supervision which specify new requirements regarding the capital requirements, the leverage ratio and the liquidity standards of banks. These regulations are to be successively introduced as of 2013. Bid/ask spread Describes the difference between the highest price the buyer of a security is prepared to pay and the lowest price at which a seller is prepared to sell. Bond with warrant Bond issued by a cooperation, which contains warrants. These give the holders of the option the right to purchase shares in the company during a certain period at a predetermined price. Certificate Derivative whose performance depends on the price development of the underlying securities and financial products, in particular indices (index certificates) and specially structured stock baskets (basket certificates). Close-out risk Risks associated with the premature termination of financial contracts such as swaps. This risk arises from the amount that has to be paid comprising the difference between the market price on termination of the contract and the price on final maturity. Confidence level The probability that a possible loss will not exceed the maximum level defined by the Value-at-risk (VaR). Core capital Sum of subscribed capital and general reserves, less intangible assets of comdirect bank AG in accordance with the German Commercial Code (HGB). At comdirect bank, own funds correspond to the core capital. Cost/income ratio Used to measure cost efficiency. The relationship between administrative expenses and earnings recorded in a financial year. Counterparty risk Risk that a counterparty, e.g. in securities trading, is unable to fulfil its contractual obligations. Credit spread Measure of the premium or discount on a reference interest rate whose level depends on the credit rating and market positioning of the respective debtor.
131 Credit value-at-risk (CVaR) Risk indicator. Unexpected, maximum, anticipated loss from credit risks, which is determined using the VaR concept (see Value-at-risk). DAXSector Financial Services Price Index One of 18 sector indices which make up Deutsche Börse s Prime Standard. Various financial service providers are listed in the index, including comdirect bank AG. Deferred compensation Deferred remuneration. Under an occupational old age pension, part of an employee s salary is invested to later be converted into pension payments. Deferred taxes Income taxes to be paid or received in the future, which mainly result from the different valuation bases used for the tax balance sheet and the commercial balance sheet. They do not constitute actual tax office claims or liabilities at the time the balance sheet ist prepared. Deposit business Management of customer deposits, including in current, call money, fixed-term and time deposit accounts. Earnings are generated by fees as well as, in particular, by the positive interest margin. Economically required capital The amount that with a high level of certainty covers unexpected losses from risk carrying positions. Not identical to balance sheet or regulatory capital. European Interbank Offered Rate (EURIBOR) The interest rate that European banks demand from each other when trading deposits with a fixed term of one week or between one and 12 months. It is the most important reference interest rate for variable rate euro bonds. Exchange Traded Commodities (ETC) Open-ended securities enabling investors to invest in commodities. They are traded on the stock exchange like equities, have an unlimited term and offer a high degree of liquidity. Exchange Traded Funds (ETF) ETFs are traded on the stock exchange and track an index (e.g. share, bond or commodities index). Fair Value Price at which assets and liabilities would normally be traded between business partners. The fair value is used in the event that market prices are not used for the assets. Final withholding tax Flat rate 25% tax levied on income from capital investments and private capital gains as of 1 January 2009. The final withholding tax applies to interest, dividends, capital gains, income from investment funds and certificates. Forward Rate Agreement (FRA) Contractual agreement between two business partners to hedge interest rate risks, whereby the buyer of the FRA invests a notional sum with the seller at a pre-agreed interest rate at the end of the term. Free float The freely tradable shares of a company. The free float includes all shares which are acquired and held by the investing public as opposed to major shareholders. Futures contract Contractual agreement to buy or sell a set amount of a particular commodity at a specific price on a specific future date. German Accounting Standards (GAS) Deutscher Rechnungslegungs Standard (DRS) Recommendations (standards) on the application of accounting principles. German Banking Act (KWG) Act introduced to ensure the protection of creditors and the functioning of the banking industry, which contains regulations on banking practices and banking supervision. Hedge accounting Creation of hedging relationships between assets (e.g. retail lending) and derivative financial instruments used for hedging purposes (e.g. interest rate swaps), in order to minimise the effects of changes in value in the income statement. Home Banking Computer Interface (HBCI) Online banking standard to standardise the interfaces between bank customers and one or more banks. Interest rate swap Contractual agreement between two parties relating to the exchange of differently structured payment flows for a specific period of time. Interest rate swaps can be used to hedge against an increase or decrease in interest rates. This offsets fixed and variable payment flows. Internal Capital Adequacy Assessment Process (ICAAP) Key element of the second pillar of Basel II regulated by Section 25a German Banking Act (KWG) in conjunction with the Minimum Requirements for Risk Management (MaRisk). ICAAP comprises all procedures to identify and measure the relevant banking risks and their appropriate backing with internal capital.
132 International Accounting Standards (IAS)/ International Financial Reporting Standards (IFRS) International accounting principles which facilitate international comparison of consolidated financial statements. International Accounting Standards Board (IASB)/ International Financial Reporting Interpretations Committee (IFRIC) The IASB is responsible for approving accounting standards. It is supported by the IFRIC, formerly the Standard Interpretations Committee (SIC). Investment grade Upper ratings category, e.g. at Moody s ratings Aaa to Baa. Issuer risk Describes the risk that a securities issuer becomes insolvent and holders of the securities lose their invested capital. Leverage ratio (LR) Ratio within the framework of Basel III which limits the banks level of indebtedness and stipulates that the ratio of Tier I capital to total lending may not fall below 3%. Lifecycle fund Also called a target date fund. This fund allows the investment strategy to be adjusted according to the changed requirements at different stages. For example, at the beginning the capital can be invested in higher risk equity funds, with a greater weighting subsequently given to safer fixed income and money market funds at a later stage. Liquidity coverage ratio (LCR) New liquidity ratio in Basel III which describes the short-term liquidity risk profile of the banks. In future, the bank must maintain a minimum portfolio of highly liquid assets to safeguard their liquidity requirement in stress situations for at least 30 days. Minimum Requirements for Risk Management (MaRisk) These include, in particular, setting up a proper business organisation (e.g. function separation of sales and back office) and implementing a system of appropriate internal controls for the trading and lending divisions. Multi-KAG Funds from different investment companies in one custody account. Multi-tier server structure Multi-layered software infrastructure in which the software components are shared between several systems. Net Stable Funding Ratio (NSFR) Ratio in Basel III which describes the ratio of the available amount of stable funding to the required amount of stable funding. One Third Participation Act (DrittelbG) Law governing codetermination by employees on the supervisory board. This stipulates that one third of the supervisory board must constitute employee representatives elected by the entire workforce in a primary election. The regulations of the Act apply to companies with the following legal forms: AG (plc), KGaA (limited partnership), GmbH (limited company), VVaG (mutual insurance company) and commercial cooperatives generally with more than 500 employees. PIIGS Acronym for the five euro countries Portugal, Ireland, Italy, Greece and Spain. Prime Standard Sub-segment of the Regulated Market with additional admission requirements compared to the General Standard. Prime Standard companies must comply with high international transparency standards. Projected unit credit method Method used to determine pension obligation, which takes account of future rates of increase in salaries and pensions among other factors. Pull-to-par effect Describes the effect in which the market price converges to the par value of a bond as the remaining lifetime decreases. Revaluation reserve The market value changes in securities and participations are shown in the revaluation reserve with an income-neutral effect. Risk assets Risk-weighted positions, which have to be backed by equity. At comdirect bank, risk assets are calculated taking account of Section 10c German Banking Act (KWG) (zero weighting of intragroup receivables). Risk cover potential These comprise the maximum available equity which can be used to hedge against unexpected losses. Risk-bearing capacity Corresponds to the risk cover potential. Sales follow-up commission Annual fee paid by an investment company to the brokers of its funds.
133 Solvency Regulation (SolvV) Regulation governing the capital adequacy of institutions, groups of institutions and financial holding groups which came into force on 1 January 2007. Standard Interpretations Committee (SIC) See International Accounting Standards Board (IASB)/International Financial Reporting Interpretations Committee (IFRIC). Stock option programme Issue of non-transferable subscription rights to selected employees, in particular management and executives, which entitle them to purchase the equivalent number of shares in the company within a specified exercise period once specific performance targets (exercise hurdles) have been achieved. Stress test Simulation of impact of crisis situations in the capital market on the risk and earnings position. Treasury Head office division that manages liquidity and market price risks. Traditionally responsible for liquidity management, refinancing and carrying out transactions in foreign exchange, money market, precious metals as well as issuing notes. Value-at-risk (VaR) The maximum loss of value of a portfolio in line with a specific probability and within a specific holding period. Warrant The owner of a warrant is entitled (but not obliged) to buy (call option) or sell (put option) a certain number of shares or other securities at a stipulated price within a certain period of time. White labelling Sale of a product under a name other than the company s own brand name.
134 > Six-year overview of comdirect group 2010 Change in % 2009 Change comdirect group as of 31.12. Customers number 2,296,075 6.8 2,150,563 3.4 Custody accounts number 1,482,023 4.4 1,419,037 0.6 Executed orders number 15,305,203 4.4 14,661,234 17.1 Total assets under custody in million 42,535 19.6 35,572 15.0 of which: portfolio volume in million 32,197 21.7 26,463 29.4 of which: deposit volume in million 10,338 13.5 9,110 13.1 in % comdirect business-to-customers (B2C)* business line as of 31.12. Customers number 1,559,021 7.5 1,450,720 7.5 Custody accounts number 748,151 4.0 719,194 3.1 Current accounts number 647,048 21.2 533,928 25.6 Tagesgeld PLUS ( call money plus ) accounts number 1,130,998 17.7 960,935 18.0 Executed orders number 7,824,053 6.9 7,319,045 20.7 Average order activity per custody account number 10.7 3.9 10.3 25.0 Order volume per executed order in 5,110 13.3 4,512 4.8 Total assets under custody in million 26,319 18.3 22,241 9.3 of which: portfolio volume in million 16,113 22.5 13,158 33.2 of which: deposit volume in million 10,207 12.4 9,083 13.2 Credit volume in million 198 12.4 176 11.3 comdirect business-to-business (B2B)* business line as of 31.12. Customers number 737,054 5.3 699,843 4.1 Executed orders number 7,481,150 1.9 7,342,189 13.1 Total assets under custody in million 16,216 21.6 13,331 25.9 Earnings ratios Net commission income in thousand 172,772 16.1 148,757 16.0 Net interest income before provisions in thousand 102,074 6.1 108,693 33.5 Administrative expenses in thousand 210,028 5.6 198,918 18.1 Pre-tax profit in thousand 80,874 6.4 75,993 8.2 Net profit in thousand 59,634 5.3 56,624 6.9 Earnings per share in 0.42 5.3 0.40 6.8 Dividend per share in 0.42 1) 2.4 0.41 0.0 Balance sheet key figures as of 31.12. Balance sheet total in million 11,040 12.8 9,785 12.3 Equity in million 514 3.6 533 12.2 Equity ratio 3) in % 4.4 4.9 Own funds ratio 4) in % 43.0 45.5 Relative ratios Return on equity before tax 5) in % 16.8 17.6 Cost/income ratio in % 72.1 70.4 Employees figures as of 31.12. Employees number 1,120 3.0 1,155 0.7 Employees full-time basis number 1,002.9 2.6 1,029.2 0.4 *) B2C: comdirect bank AG; B2B: ebase GmbH, excluding contributions from branch customers of Commerzbank AG 1) Dividend proposal 2) Including special dividend 3) Equity ratio = Equity (excluding revaluation reserve)/balance sheet total 4) Own funds ratio = own funds for solvency purposes/(risk weighted assets + 12.5 x eligible amounts for operational risks) 5) Return on equity = Pre-tax profit/average equity (excluding revaluation reserve) in the reporting period
135 2008 2008 (ex- Change 2007 Change 2006 Change 2005 (including ebase) cluding ebase) in % in % in % 2,078,850 1,349,297 34.8 1,000,722 24.4 804,690 22.7 656,064 1,427,359 697,806 8.0 645,893 6.6 606,110 10.0 550,948 17,682,007 9,231,378 7.2 9,950,097 16.1 8,572,255 28.1 6,689,617 30,933 20,342 0.2 20,373 24.3 16,387 27.2 12,879 20,454 9,876 22.2 12,688 7.9 11,759 15.7 10,161 10,479 10,466 36.2 7,686 66.1 4,627 70.2 2,718 1,349,297 1,349,297 34.8 1,000,722 24.4 804,690 22.7 656,064 697,806 697,806 8.0 645,893 6.6 606,110 10.0 550,948 425,149 425,149 25.9 337,578 29.7 260,334 66.9 155,958 814,516 814,516 > 100 400,414 > 100 66,840 0 9,231,378 9,231,378 7.2 9,950,097 16.1 8,572,255 28.1 6,689,617 13.7 13.7 13.8 15.9 8.2 14.7 19.5 12.3 4,304 4,304 18.4 5,273 3.5 5,465 8.6 5,033 20,342 20,342 0.2 20,373 24.3 16,387 27.2 12,879 9,876 9,876 22.2 12,688 7.9 11,759 15.7 10,161 10,466 10,466 36.2 7,686 66.1 4,627 70.2 2,718 198 198 6.8 216 4.1 208 5.1 198 729,553 8,450,629 10,591 177,034 138,441 9.4 152,724 11.8 136,565 37.9 99,033 163,405 162,372 27.7 127,164 43.3 88,733 38.6 64,020 242,774 208,748 11.4 187,437 38.2 135,626 13.7 119,330 82,754 77,760 14.1 90,480 5.7 85,600 62.2 52,780 60,838 57,692 0.0 57,697 1.2 57,002 66.7 34,187 0.43 0.41 0.0 0.41 2.5 0.40 66.7 0.24 0.41 0.41 0.0 0.41 70.7 1.40 2) > 100 0.24 11,158 11,070 34.5 8,233 55.3 5,301 57.4 3,367 475 476 0.5 478 22.9 620 3.5 599 4.4 4.4 5.9 11.8 17.8 49.1 49.1 21.4 40.9 54.7 17.0 16.0 16.3 14.0 8.8 74.3 72.6 67.0 60.4 68.8 1,163 906 10.0 824 12.6 732 14.7 638 1,033.3 806.4 11.8 721.5 11.3 648.0 15.9 558.9
136 > Financial calendar 2011 17 February Press-/Analysts conference in Frankfurt/Main 22 March Annual report 2010 28 April Quarterly report 12 May Annual General Meeting in Hamburg 28 July Half-year report 27 October Nine-month report > Contacts Investor Relations Dr. André Martens Phone +49 (0) 41 06/704-19 66 Fax +49 (0) 41 06/704-19 69 e-mail investorrelations@comdirect.de Tobias Vossberg Phone +49 (0) 41 06/704-19 80 Fax +49 (0) 41 06/704-19 69 e-mail investorrelations@comdirect.de Stefanie Wallis Phone +49 (0) 41 06/704-13 83 Fax +49 (0) 41 06/704-19 69 e-mail investorrelations@comdirect.de comdirect bank AG Pascalkehre 15 D-25451 Quickborn www.comdirect.de Press Relations Johannes Friedemann Phone +49 (0) 41 06/704-13 40 Fax +49 (0) 41 06/704-34 02 e-mail presse@comdirect.de You can download our annual and interim reports in German or in English from our website at www.comdirect.de/ir under Publications. Our order service also offers the option of inclusion in the distribution list, which means that the reports will be sent to you on publication. You can download our published press releases in German or in English on our website at www.comdirect. de/pr. The English translation of the comdirect group annual report is provided for convenience only. The German original is definitive. Concept, layout and translation ergo Unternehmenskommunikation, Cologne/Frankfurt am Main/Berlin/Munich Photography Uwe Aufderheide, Hamburg
comdirect bank AG Pascalkehre 15 D-25451 Quickborn www.comdirect.de